If you want to get a loan for a really short duration, say a month, because of an unexpected happening, you can get payday loans. Payday loans are basically short-term loans used only as an option for some emergency requirements. These cannot be taken for larger purchases such as a home or a car.
The lender provides a short-term loan, mostly unsecured to the borrower, which he has to return at the next payday. Frequently, some process of verification of the employment or income is needed, but not all payday lenders do this. The borrower issues a post-dated cheque in the name of the lender, which has the amount of the loan and some fees levied on it.
The borrower should return the entire amount to the lender at maturity period, and if he is unable to do that, the lender redeems the cheque. And if the account cannot provide that much of amount to the lender, then some extra fees is levied on the bounced cheque. The fees can sometimes be as high as the face-value of the cheque. The loan can even be rolled-over at the end of the month, and then extra fees will be charged.
Basically it is an expensive loan to take and you want to get payday loans, and then make sure you take it only when needed in some form of emergency. And mostly, in the US, the segments of population who take payday loans are- people without their college degrees, African-Americans who earn less than $40,000 annually and people who have been divorced or separated.
The payday loans are mostly used when people are suffering from seasonal and emergency expenses, back to school costs or unexpected bills or repairs.
In the US, payday has been legalised in 27 states and 9 other states allow it in a restricted manner. The reason for this is that, it is criticised as being predatory on the consumers. The fees levied are very huge as compared to the loans taken from traditional financial institutions like banks and credit unions. Another big reason is that the payday lenders are sometimes known to implement aggressive collection tactics.
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