Payday loans are fast become an invaluable resource of people looking for a source of funds in an emergency. In fact, these loans have proven to be so popular, that the payday lending industry processes billions of dollars every year. Nonetheless, you should become familiar with the different aspects of speedy payday loans before you go for one. This will help you make the best decision for your financial circumstances.
The Pros
For the borrower, these loans can be quite advantageous in a number of circumstances. Some of these advantages are mentioned below.
- When caught in the middle of a financial emergency, a payday loan with flexible payments can prove to be a major benefit. They are a ready source of cash which can be borrowed within minutes. Some emergencies include the payment of rents, repair costs for your car and medical costs. In such cases, you may feel the need for a bit of extra cash which is exactly what payday loans provide.
- The absence of a credit report is another major benefit. You will neither need to provide such a report when getting the loan or let the loan affect your credit rating. Your eligibility for getting a payday loan is in no way affected by your credit rating.
- As a result, opting for payday lending can actually protect your credit rating in a way. If you are unable to fulfill your financial obligations such as loan repayments, you can take out a payday advance. This way, you can prevent a negative effect on your credit rating.
- For some people, these loans can also be a way to remain financially independent. Instead of asking for money from family and friends, you can get money through these loans to see you through the problem you are facing. This is common when you are young and without a well-paying job.
- It might be possible to use these loans to save you money in the long run. You can use them to cover your immediate expenses such as bills and rent. This will help you avoid the high charges for bank credit card fees, overdrafts and bounced checks
The Cons
In spite of the advantages of a payday loan with flexible payments, you will find that there are certain negative aspects about such a loan. Here are some of the disadvantages of payday loans you should be aware of.
- You must remember that payday loans are meant to be for a short period of time. If you need a loan to cover you over the course of months and more, these loans will be utterly unsuitable.
- Interest and finance fees are a major part of these speedy payday loans. The charges levied for these loans are higher than what you would have to pay for a regular bank loan. If the payments are not paid by the right time, you may have to pay a much higher sum.
- You must have a current bank account before you can apply for this type of loan. Therefore, you cannot opt for them if you deal in cash only.
- It is also important for you to be employed in a fulltime job before applying for this loan. Most institutions will not lend the money if the borrower does not have a job or is working part-time. Even those who are receiving social assistance or unemployment benefits will be ineligible.
- The amounts provide by these loans are generally small with $1000 being the generally accepted upper limit. $350 is the average amount loaned. As a result, you will need to find another way to get the money if you need more than $1000.
- In the world of payday loans, fraudulent and unscrupulous lenders and institutions are not unheard of. Therefore, you must make sure that the institution you are getting the money from is a good one. A background check of the lender or institution is essential if you want to prevent problems down the line.
You need to weigh the advantages and the disadvantages of these loans so that you can arrive at the best decision based on your finances and circumstances. Payday lending is not meant for everybody. In some cases, you will certainly be better off opting for a proper bank loan.