Payday Loan?

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Definition

Payday loans are small, usually $500 or less, short term loans that are due to be paid within two weeks or within a time frame of your next paycheque. They are high-interest loans with interest rates ranging from 30% to 50% depending on your credit rating. 

Once you are approved for a payday loan you will receive the money immediately but must repay it within two weeks.

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LAYMEN TERMS

Payday loans are for people who need money quickly to cover bills or emergency expenses. Once you are approved for a payday loan you will immediately receive the amount of money you applied for. However, it must be paid back in its entirety by your next payday.

If you do not pay back the payday loan within the required time frame the loan could be sent to a debt collector, it can cause your credit score to drop down, your paycheques could be garnished, and any loans you may need in the future could have much higher interest rates.

HOW DOES THIS TERM APPLY TO YOU

You work for a company that pays their employees every two weeks but you are short $200 for your rent that must get paid before your next payday. You could then take out a Payday loan for the $200 to cover the rent but then would have to pay back the loan (with interest and fees) on your next payday.

With fees and interest, the $200 you borrowed would jump up to about $250 that would have to be paid back.

Be aware that problems can occur when you are short monthly for your rent because you have to pay back the Payday loans.

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