Definition of 'Payday Loan'
Payday loans are typically offered by online lenders or storefront lenders. The borrower must provide proof of income and a bank account in order to qualify for a loan. The loan amount is typically between $100 and $1,000, and the interest rate is often around 400%. The borrower must repay the loan, plus interest, on their next payday.
Payday loans are a very expensive way to borrow money. The high interest rates and fees can make it difficult for borrowers to repay the loan. In addition, payday loans can trap borrowers in a cycle of debt. If a borrower cannot repay the loan on time, they may have to take out another payday loan to cover the cost of the first loan. This can lead to a spiral of debt that is difficult to escape.
There are many other options available for borrowers who need short-term cash. These options may include personal loans from banks or credit unions, credit cards, or even borrowing from friends or family. These options are often less expensive than payday loans and do not carry the same risk of trapping borrowers in a cycle of debt.
If you are considering a payday loan, it is important to weigh the risks and benefits carefully. Payday loans can be a very expensive way to borrow money, and they may not be the best option for your financial situation. There are many other options available that may be less expensive and less risky.
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