For the borrower a payday loan can be the last resort for fixing a financial gap and saving a situation which only cash can solve. For the lender it means a higher risk to accept somebody for a payday loan than for a traditional loan. The reason for this is that no asset like a house or car has to be provided as security. Therefore, the maximum sum which can be taken out is usually not to high and usually has to be paid back within four weeks.
Because of the higher risk, a payday loan is also more expensive than other loans. This is why a payday loan only should be considered if other options have been proved impossible. The interest rate for a payday loan in fact, can be extremely high and in the end, could even cancel out any benefit – and if one finds oneself not being able to pay back the loan in time, the result could be further damage your credit score and serious debts. Nevertheless, some firms try to take advantage of other people’s financial misery and charge astronomical fees and in the worst case one has to pay them without ever receiving any money. This is why it is essential to take enough time to check a lender carefully even in an urgent situation.