Like auto-insurance companies, the payday loan industry understands that accidents happen. Every year, there are millions of automobile accidents, causing physical injuries, property damage, and even death. When property damage and injuries arise, some drivers may seek out payday loans to cover the costs of the accident and/or the resulting unpaid bills.
While a payday advance can function as a safety net by covering smaller costs associated with auto-accidents, such as an insurance deductible, doctor's visit, or utility bill that has gone unpaid as an effect of the collision, these types of loans are not large enough to cover the full cost of such accidents.
Payday loan lenders rarely grant loans in excess of $1,000 due to the high interest and short payback period associated with such advances. Thus, this type of service is less than ideal in a serious, costly accident. While this may make these types of loans less desirable to some seeking a loan, it is actually a great service to the borrower, as it protects him/her from taking out more money than he/she can realistically pay back.
In anticipation of unforeseen accidents, loan lenders encourage individuals to establish a budget that allows for a savings account. However, approximately one-third of Americans do not have savings accounts, demonstrating that other protective measures need to be in place for motorists.
Luckily, most states require drivers to maintain at least liability insurance. Like payday loan lenders, who look out for their patrons by limiting the amount that an individual can borrow, auto-insurance companies look out for their clients by limiting the drivers out of pocket expenses should an accident occur. Although auto-insurance rates can be costly, the alternative of paying for accident damages on the spot and out of pocket is far more expensive. However, not all auto-insurance is the same and a driver can save a significant amount of money by researching companies and policies prior to signing a contract.
There are two major types of auto-insurance: liability and full-coverage.
*Liability insurance, which is required in most states, covers only the other motorist's damages when you are declared at fault for an accident. It does not cover damages done to your vehicle or your medical expenses. As such, it is a protection for the other motorist and protects you against lawsuits and expenses that could arise when you are at fault for an accident. Since most states require this type of insurance, if you are not at fault, you will likely be covered by the other driver's insurance, as he/she presumably, if driving legally, will likewise have at least liability insurance. Because it is more basic, this type of insurance is generally inexpensive.
*Full coverage insurance is a blanket term for collision and comprehensive coverage. This type of insurance is required on most cars that still being paid off, whether through a temporary lease or a standard loan. In addition to covering the other motorist's damages, collision insurance covers damages to the insured vehicle in the case of an accident. Comprehensive insurance covers other unforeseen occurrences that cause damages, such as theft, weather, and vandalism. Additionally, full coverage insurance generally covers a rental car, tow, and medical expenses. Because this insurance is so inclusive, it can be pricey, depending on the specific policy.
Don't count on a payday loan to cover all your accident expenses; take the safe road and choose the insurance type that works best for your budget and peace of mind.