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Payday Loan VS. Short Term Loan: Difference?

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When most people think of payday loans, a number of unsavory images come to mind. Ridiculously priced interest rates, businesses taking advantage of consumers in need of immediate cash, etc. However one such company claims to be different. Thinkcash offers installment loans and bad credit loans while claiming to offer much better rates than a payday loan company would offer. Here’s a description of terms and methods from their website:

“ThinkCash provides short-term personal loans from $250 to $2500. The amount you are offered and the finance charges and interest rate will depend on your application information, your credit information, and your payment history with us. Don’t worry if you are not approved for the maximum amount on your first loan. As you make successful payments, you may become eligible for larger loans. To qualify for a loan you don’t need to be employed, but you must have a regular source of income.

The cost of your loan is based on the size of the loan you are approved for. It ranges from $1.00 per day per $100 borrowed (365% APR) for small, short-term loans down to $0.24 per day per $100 borrowed (87% APR) for larger, longer-term loans for customers with successful payment histories or higher credit scores. While these rates are lower than the rates charged by many other short term lenders, they are higher than some other forms of credit, so we encourage you to pay off your loan as quickly as possible.”

Now I don’t know about you, but the APRs (Annual Percentage Rate) listed there are less than most payday loans but still very high. These loans are designed to be short term inflows of cash to tide you over until your next paycheck, essentially. As with payday loans, a short term loan is an instrument of last resort, and should be treated as such. More effective methods of dealing with emergencies would be having an emergency fund on hand for times like this. But if you’re emergency fund has run dry (or doesn’t exist!?) than a short term loan would be a better option than the average payday loan service.


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