This is because people are starting to discover how their lives can truly benefit from a payday loan. Before payday loans there was not a place for people to turn when they needed a small amount of cash and needed it quickly.
Banks and other financial institutions only offered long term loans so if you needed cash it would take you too long to pay it back. Plus, when considering whether or not to give you a loan those other financial institutions look to credit scores and thus if your credit is poor you could be denied.
In recognizing this lenders saw the need for a short term loan that would act as a cash advance of your next paycheck. This means when you know you will be getting paid in a week but you need the money now you can take out a quick loan and then when you get your paycheck pay off your loan the following week.
So you understand a little more about payday loans but you still want to know if they will actually save you money. This is when you have to compare them to your other options.
Imagine you have to pay off your rent at the end of the week but your car breaks down. You all of a sudden find yourself $100 short of paying both these debts.
You now have to figure out how to get that $100 right now so you can fix your car and be on your way. In this situation one thing you consider is not paying your rent on time.
If you could just wait one week for your next paycheck then you would have all the money you need. It would be nice if your landlord would let you but if you pay your rent late he will charge you a late fee.
This fee is a percentage of how much you pay each month and can become quite costly so you decide this is not a good option. Another idea you have is to simply write out a check for both bills in full and then hope one of the debtors is late in depositing your check.
If they are late then in one week when you get your paycheck you could quickly take it in and then the money would be there. Again you are facing some problems because businesses try to take in checks as soon as they get them for management and financial reasons.
When your landlord and the auto shop take in your checks they will discover you do not have enough funds because you check will bounce. Financial institutions have fees they apply to checks that bounce which range from $25 to $50.
It is now important to understand what a payday loan would cost you. On a $100 loan from a payday lender you will be paying just over a dollar day in fees.
This means if the loan was to last two weeks you would owe just $115. Looking at these numbers you can see that a payday loan can truly save you money.