Payday loans are also referred to as cash advance loans and are short term loans that are provided by lenders to the borrower till the next payday. It is a loan that is available immediately without many hassles about papers and such things. Only a few documents have to be produced upon which the loan is processed within a few minutes.
Usually, payday loans are only for amounts between $100 to $1000, and not for bigger loans. One of the dangers of this loan is that the lender fees prove to be very expensive from $15 to $25 per $100 while the fees are only for a period of 14 days. However, if you do attempt to repay your loan early, you are very likely to be socked with another fee! And if you do miss the repayment date of the loan, you will have to pay the entire fee all over again! So in payday loans, you can neither pay off your loan early nor can you delay yourself in payments! This is a loan where the borrowers may find themselves in a debt trap over a short period of time. This is because with each extension of the loan, the amount of the fees totally increases such that at the end of the second, third or fourth extensions, the fees may equal the loan amount!
Another danger of this loan is that some companies charge you to become their customer with membership fees, along with charging you as their customer! Usually lenders keep a signed cheque from you to be presented on payday for the repayment of their loan. However, some lenders may keep your car title as collateral, and upon missing your payment, you may find your car permanently missing! The reason for collection of this loan being harsh is the risk involved here. And as in all contracts, do read the fine print of the contract of the payday loan, lest you don’t repent in the future!