Top reasons not to take payday cash loans

Payday cash loans have stirred a hornet's nest ever since they were introduced in the early 1920's. These loans are also called payroll advance or deferred deposits and they put in an appearance when employers started paying their employees with checks instead of cash. They were initially designed as short-term, unsecured, high interest cash loans intended to be the last resort of salaried people who were faced with a sudden financial emergency.

When payday cash loans were introduced, they became a huge hit because of two main reasons. Banks were not interested in disbursing such small, short term loans and discouraged such requests. Also, during the Great Depression, more and more people lost confidence in banks and refused to borrow from them.

Today, these loans have evolved according to the needs of consumers. The loan amount of instant payday loans may range from £100- £1,500 depending on the monthly income of the borrower. These loans are short term loans and must be paid back within 14-28 days. Typically, the borrower's bank account is credited with the money once the loan is approved. The borrower in turn issues a post dated check that authorized the lender to debit the amount along with the lender's fee after a stipulated time. Once the lending period is through, the lender will cash the check.

Payday cash loans are a welcome relief in cases where a small amount of money is needed quite urgently. However, as in other loans, most people use these loans for the wrong purposes and they end up falling into the pitfall of the unending loan cycle.

Payday loans are hassle free, quick and convenient. But, they are also very expensive. Because these are high risk loans, lenders charge very high interest rates on these loans. The APR (Annual Percentage Rate) on these loans may vary from 300 percent to well over 1000 percent. The interest rates are restrictive on these loans precisely because borrowers are discouraged from availing these loans unless it's an emergency.

Instant cash loans are perhaps the only available relief to those who have bad credit ratings. Such borrowers may find it impossible to avail of other loans, particularly other low interest loans. However, if these payday cash loans are not paid up in time, borrowers may find themselves in a far tighter financial bind. They could very well get trapped in the vicious grip of unsecured loans because of high interest rates.

Regardless of what critics say about payday cash loans, it is true that these loans have offered much needed solace to millions of people who would have been in dire straits but for these loans. However, it is important that borrowers understand the terms of the loan before they avail the loan. They need to understand how much interest they will be paying and they must have a clear cut idea of how to pay off the loan. These loans are inexpensive because their processing cost is minimal. They are short term loans and they are unsecured loans. Borrowers should know how to use these features to their advantage. Only then can payday cash loans provide the kind of financial assistance people require.