Advantages and disadvantages of Payday Loans
Online Payday Loans
Everyone’s dream is to live a life where there are no loans to pay. But in real life, this does not happen to the majority of the population. This is as a result of a few popular reasons. First and foremost, the majority of the population is salaried individuals with fixed incomes. Therefore, the chances of saving significant sums of money are meager. Even if we save, we do not have a long term perspective in our mind. Thus, once it comes to unexpected or sudden expenses, we have to depend on getting some loans to solve problematic situations. Towards this short-term objective, payday loans are considered to be dependable and useful solutions.
Payday is short term loans that are quick and can be used to cover urgent money requirements such as a car or house repair, medical bills, and more. Payday loans must be handed back on the day you get your payment with some interest rate. Thus, payday loans may help meet urgent or unexpected financial needs but also have some disadvantages. With a payday loan, you can borrow a limited amount of cash to save your situation. Then, on the day you get your pay, you are asked to return the loan with the interest rate it carries.
Let us try to discover the various benefits and shortcomings as far as payday loans are concerned a make a final call on it.
Advantages of payday loans
- Instant availability of payday loans: the whole application, verification, and the approval process is fast, and the cash is transferred instantly to your bank account. The entire process doesn’t take more than 24 hours.
- A good credit score is not a requirement: even if you don’t have the best debt service ratio or credit score, you will qualify for payday loans. Your credit history won’t be verified.
- Very convenient: You won’t have to go to a brick and mortar store because all the formalities can be completed online. You will have two options. To accept a direct transfer to your registered bank account or collect a check from a store. There is no lapse of time.
- No need to have collateral security: You can get payday loans without collateral security. The rate is slightly higher, but you are not in a risk losing your car, house, or any other assets.
- The amount of loan will be determined by your income: You will only be given a percentage of your monthly income. Therefore, even if you want to get more loans, you can’t and this acts as a check on unreasonable borrowing.
But to utilize these benefits, you must follow some precautionary steps:
- Always research the reputation and credibility of the lender you choose because you will give credit details and bank details to them.
- Find out the interest rates the lenders are offering and try to search for several renders and make a comparison of their services.
- Always understand the terms and conditions of the lender you choose to avoid hidden terms or charges.
- Once you are done your research and you have selected a lender, make a pan of your repayment. It is recommended that you repay your entire loan on a payday loan and avoid any delays on repayments as this can affect your future expenditure and add to your increasing interest rate.
The smooth and speedy approach towards payday loans may sound good and tempting, but you should always be aware of the shortcomings accompanied by payday loans. Being short-term loans, payday loans avail only a small amount of money for a short repayment period. You may find that payday loans are the easiest solution against some monthly needs, but remember that these loans come with high-interest rates.
Disadvantages of payday loans
- Need checking account and steady income: You must provide proof of income and require a checking account. There is no chance for you to qualify for a payday loan without these two.
- Payday loans can’t solve big financial problems: Payday loans can cater to small needs but can never address big issues. Rather than irrational and inconsiderate, borrowing can add to the issues further and affect your credit score negatively.
- High-interest rates: Payday loans have one of the highest interest rates. It is almost similar to credit card rates of borrowing. The rate of defaulting once could double suddenly.
- Less consumer protection and transparency: payday loans are open to fraud because there are not enough laws protecting consumer interests. The rates of lending are not regulated, and companies set their terms and conditions. In the case of double-dealing, these loans can’t be tracked, and these lending companies are brokers or ghost companies who add to already high rates of interest.
How to avoid Disadvantages of payday loans
You can avoid the disadvantages, and high inters rates of payday loan by considering the following factors:
- Never consider a payday loan if you don’t have any reason such as for shopping for fun or planning a lavishing holiday and so on.
- Apply for a payday loan in case of an essential or urgent issue such as emergency traveling to some relative or urgent medical bill.
- Make sure you research different lenders to have the best deal in terms of interest rates. If your research is thorough, you will end up with a lender giving you the best interest rates on your loan.
When we make a thorough comparison between the advantages and shortcomings of this type of loan, there are reasons to be assured that it can be a helpful short-term, insecure borrowing if the borrower understands where to draw the line. The process of discretion and knowing the products and their fine distinction is essential. If these are adhered to and a wise decision is taken, it is a beneficial, leading service.
Payday loans act as savers from financial issues you find yourself in as a result of an unexpected financial burden or unplanned monthly budget. It is always crucial to have complete information on payday loans and their benefits and shortcomings to make them helpful and avoid more financial burden.
