In the United States, many people are living paycheck to paycheck. Even those with substantial incomes often find themselves short of cash by the end of the month. Much of this problem stems from debt incurred from student loans, large purchases with payments such as cars, and credit card use as well as medical emergencies, unexpected car troubles, and other unforeseen issues. All of this can lead into a downward spiral where choices come between making payments and paying for necessities such as food, electricity, rent, etc. People in these dire circumstances often turn to easy loans, especially if their credit scores are low. Easy loans can be described as advance loans, payday loans, and cash loans.
Lending institutions which offer easy loans generally have a very simple application process. The minimum requirements are that the applicant be 18 years old or older, live in a state where the institution conducts business, have an email account, be employed, and have a bank account where funds can be transferred. Approval for a loan can be as quick as 5 minutes. Easy loans are usually one payment loans, with a repayment time frame of a few weeks to a month. At the end of the loan period, the applicant then repays the loan plus a one-time interest fee.
The easy loan program appears, on the outside, to be a valuable benefit to people, especially those who need immediate financial assistance. However, there are several drawbacks and negative aspects of the program. One such drawback is the interest rate. Though it is a one-time payment, the rate can be massive, sometimes greater than 100% annual percentage rate. One institution gives an example of a $200 loan with an interest fee of $35.21. That translates to an annual rate over 400%! If the same loan was provided as a personal loan through a credit union or bank, the interest rate could be as low as 4% annually if the applicant has good credit, and up to 22% annually for lower credit scores. That would mean that a $200 loan at a bank could have a fraction of the fees incurred, even if the applicant took longer than a month to repay the loan.
Another negative aspect of these loan programs is shortened time of repayment. Most terms are only for a few weeks. Ostensibly, this is to give the applicant time to get a paycheck before the loan is due, so that funds will be available for repayment. But if the applicant can’t repay in the time frame, the loan goes into default. Overdraft charges are billed, the loan is often sent to collection agencies, and the applicant can wind up in court. Many times, the applicant has to take out a secondary loan to pay off the first loan, and the situation becomes a vicious cycle. Easy loans appear to be an attractive way to get money quickly, but people soon find out what a terrible trap these loans can be. However, there are of course legitimate companies offering easy loans without taking advantage of their customers. These can be difficult to find so make sure to do your research (see easy loans NZ, for example).