Payday loans: All you want to know

Payday loans are termed as short term loans used to get away a tough situation. Needless to say, they may turn out to be more dangerous for your business at times.  So before diving in the morass, think twice about the costs and risks of the loans with no credit check. 

As the name suggests, payday loans are meant for smaller duration, typically about two weeks or so. They are helpful in case of immediate cash crunch. The payday lenders ask for post-dated check with some fee, against the loan. The check is paid when the borrower has funds. In case of shortage of funds on the due date, the loan is rolled over or extended with additional fee. 

Getting a payday loan is easy, as borrowers don’t require good credit scores, preferably credit history is not considered by the payday lenders.  This is the reason payday loans are loans with no credit check; and are popular among small businesses. Due to higher annual percentage rates, payday loans are exceptionally expensive. 

The main drawback is the high costs involved, in the form of fee component. They are of great help in short term wherein might help is evading the rough condition. Suppose you want to buy some component for the manufacturing, so that you can continue the normal business. But for a long term source of funds, they can be quite risky and will drown you I loans of payday lenders. Not just the higher interest rates, but also the regular bounced checks will degrade your credit scores. The banks, vendors and payday lenders all will worsen the situation for you. 

Moreover, looking at the potential of the payday loan market, banks have also plunged into the system. Though they are no better than the traditional payday lenders, they result in steep risks. The banks have the liberty to access the checking accounts and collect the funds. You may ponder over the ways to utilise the money and it’s gone in the hands of the banks. But if you could negotiate on the fee structure and other terms, it would be beneficial in the long run. 

The borrowers can consider some other ways to get the loans without credit check be it emergency cash fund, build a strong market base, credit card, unsecured loans, part time jobs, overdraft facility, peer lending services etc.

If loans are not paid on due dates these payday lenders can send legal notice and damage your credibility. The payday lenders have the opinion that their loans with no credit check are economical as compared to bounced check fees and overdraft fees. They believe payday loans are an easy and fast way to get money for small businesses. 

Source:- http://www.lendclouds.com/blogs/payday-loans-all-you-want-to-know