What Are Payday Loans For?

Payday Loans were introduced to fill a gap in the market. It was noticed that people with bad credit rating had very little options when it came to borrowing money and so something was done about it. This is when the payday loan was developed.

Lenders only allowed people to have a small amount of money because they were a high risk. They also only let them have it for a short period of time, for the same reason. The problem with lending a large amount of money for a long time, is that you need to trust that the person will be able to pay it back. That is a long time to trust them for.

Payday Loans
If you have a bad credit record you may feel it is unfair. You will have this if you have either not paid back a previous debt on time or if you have never borrowed money before. Lenders will have no way of knowing that repayments will be met, either because there is no past history or they have not been met in the past. This is a risk and not only will they only lend small amounts but they will only lend for short periods of time and they will charge a lot of money. They have to make enough profit from each borrower to cover the cost of those who do not pay. Again, this may seem unfair, but without this ‘insurance’ they would not be able to lend at all.

So if you have a bad credit record and need a small amount of money to keep you going until you next get paid, then the payday loan is perfect for you. It could help you to manage your money if you have an unexpected expense that needs to be paid for before you get your next pay check or some other emergency. It is good for many people to know that there is this source of money available to them if they have a desperate need for it. It seems that this is a big market as many people take payday loans out.