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Even though payday loans often get a bad reputation because of stereotypes and competitive advertising, they offer consumers several benefits that save them from costly late charges or recurring overdraft fees. As more than 12 million Americans take advantage of these benefits, more than $7 billion enters the local economies to pay for rent, medical bills, repair needs or monthly utility expenses. Here are three more reasons that people take out payday loans.
How Do Payday Loans Work?
A payday loan is a short-term solution for borrowers who visit storefront locations or seek out online payday loans in Louisiana. After a local store or online lender verifies your income and banking data, a determination will be made on your ability to repay a loan. The information also helps lenders establish how much to loan as well as the repayment terms. In Louisiana, a borrower must not get more than $350 and have an annual percentage rate (APR) of less than 650 percent. The high storefront APR makes direct online lenders better options for loan amounts and repayment rates.
It takes minutes in a storefront location or to direct deposit in a bank account. You must write a check due or sign an authorization form post-dated by two weeks. Once the amount deducts from your account, you will need to start a new payday loan. A check is a critical component for approval as it allows lenders to forego a credit check. The due date will coincide with your next paycheck, so you will not have to worry about overdrafts. A signed check or form guarantees your payment and keeps administrative costs down because of the need for collections.
Short-Term Loan Relieves Financial Stress
Borrowers interpret payday loans as short-term solutions to get them through the unexpected bills that will leave monthly bills unpaid. According to research, more than seven out of 10 Americans suffer from financial stress regardless of geographic location or income level. When a car breaks down or a family member needs expensive medical care, a small loan amount will overcome the challenges that often create the financial stress.