The Pros and Cons of using a Payday Loan as a Quick Cash Solution
The majority of us have financial difficulties at some time or another during our lifetime. It could be due to an illness, house expenses, or even bills. In the event that you need to borrow money to pay for the problems is a major issue. It is a blessing to have relatives and friends to go to in the event they require borrowing additional cash. It’s just not happening often and the people we typically turn to can’t offer cash, either.
If this scenario occurs to you then what are the alternatives you can choose from? You might think of taking out a payday loan which is always available. However, before you apply for the payday loan, make sure you understand the definition of what it is and what the disadvantages are of taking one.
What is a payday advance?
If you’re in a bind and require cash in a hurry to pay for your bills, payday loans can assist you to quickly resolve your financial issues.
In simple terms the definition of a payday loan is fast cash loan with an interest rate that is high as it carries a substantial risk to lender. The loan is paid at once, which is when you receive your next pay check. It’s what payday loans are however there are important things to know prior to you take the loan in the near future.
Below we have listed the advantages and disadvantages of payday loanselements you should be aware of before making your choice.
Benefits of taking out an advance loan
These are the advantages when you take out payday loans, and some of these benefits are attractive enough to attract many people to get this type of loan today.
1. Simple application.
Many of the lenders who provide payday loans are available 24 7 days a week, and have online applications. The application process is simple and approval can be made promptly, making this kind of loan a great option for those who are in desperate need of money.
2. No requirements that are strict.
One reason payday loans become an easy alternative for those who wants cash fast is due to the fact that they have lesser requirements. In contrast to traditional loans, they have a variety of documentation to prove your capability to repay the loan. However, with payday loans, you will only require the following documents:
- at least at least 18 years of age
- You must have a government ID, (or Social Security number)
- Worked and have a consistent source of income
- Maintain an active bank account
3. There is no credit check required.
Another advantage of payday loans is that even in the event that you have bad credit history or have an unsatisfactory credit rating, then you may nevertheless obtain one. In the case of payday loans, no credit check is required. This is what makes payday loans appealing. There are numerous online lenders who offer payday loans for bad credit.
Be wary of this. You could get the money fast, but it will come with a high interest rate and hefty penalty if you don’t meet the payment schedule. This is the biggest disadvantage of taking out the payday loan and is often, it is the reason why people end up in debt.
The cons of the payday loan
While there are advantages, but there are some disadvantages when the process of obtaining payday loans. Here are a few of them:
1. High-interest rate.
If you’ve ever tried getting an personal loan or used your credit card, you’ll be able to see that the rate of interest for both of them in comparison to payday loans is massive. The fact is that the cost of a payday loan is high which is the reason why some of the borrower are in a cycle of debt since they can’t pay back the full amount within the timeframe they have set.
Apart from the high interest of payday loans however, the time limitations are also a major issue. Certain lenders will offer up to three months of repayment, however typically, payday loans are paid in one go, making it difficult for some clients. There are monthly costs and budgeting needs to be completed in order to repay an amount in full isn’t easy.
3. Collection methods.
If you get the payday loan, you and the lender sign an agreement that you agree to pay the loan on the due date. Because lenders are more prudent, they ask customers to sign the use of a CPA or an Continuous Payment Authority. This permits them to make direct payment into your bank account regardless of whether the money is in there or not.
This practice of collection is what makes borrowing money for payday an unwise choice. This is why you should make sure you have exhausted all your resources before deciding to take out the payday loan immediately.
Payday loans are a fast fix loan, you can get the cash you need quickly and easily. But, it has certain drawbacks, which require you to be careful. It is always possible to get cash advances however, you must only need it to meet a financial need and not to pay for extravagant expenditures. Additionally, you’ve explored all of the ways that you could use to borrow money. This way, you are aware that getting payday loans is the only option for you.