If you are the type that always runs out of cash before the next paycheck is issued or next payday, no doubt the thought of getting a loan must have gone through your mind, and you must have considered the Payday Loans Pros and Cons. Taking a loan or borrowing money seems like a good idea since it’s going to keep you till the next payday, but have it in mind that there are better options than taking a loan and taking a loan is not all that ideal.
One can really be stranded at times and with no option, you have to meddle your way through by using some assistance from a lender who is definitely going to charge interest. The most common and easily gotten loan that is usually sort for in situations like this is the Payday Loan.
Payday Loans Pros and Cons
A Payday loan is relatively small cash given out to the borrower that is automatically collected by the lender on the Payday or the day the borrower’s paycheck is signed; it is a loan that becomes due on the Payday of the borrower.
Applying for a Payday loan is very common these days and records have it that over 12 million Americans apply for Payday loans annually, this is as a result of the ease in the process.
Yes, the process is easy and you get your money in no time, this has made a good number of person to rush into applying for Payday Loan, just so they could keep up till the next payday, this they did without putting into consideration the pros and cons of getting a Payday loan, and it has cost them more than just the interest on the loan.
Getting a Payday loan is not all that a bad idea, but you should be familiar with the Payday Loans Pros and Cons so you will know how to manage it in order for it not to gradually turn to a habit that continually sucks from your future paycheck.
Here is a breakdown of the pros an cons of taking a Payday loan
Pros and Cons of Payday Loans
Follow this Payday Loans Pros and Cons, and it will help you in managing your Payday loan debts or even end your borrowing completely.
Payday Loans Pros and Cons (continued)
There are some pros of getting a Payday loan, these are;
- Application for the payday loan is easy: Getting a Payday loan seems very easy, especially with the ease of application, it easy as such that applications are accepted online, mobile applications for Payday Loan even exist, where you can actually get a loan from just lying on the couch. The ease of the application does not even affect the time, you apply and get credit in no time, unlike other loan schemes where you have to wait in the name of we are ‘processing your loan request.’
- No credit check: Ordinarily, for one to get a loan there is always a credit check on the borrower credit score or history, once it is noticed that you have a poor credit history, you are deprived of having a loan. It is only rational for the lender to do this, because if you have faulted or you constantly delay in paying up loans, then there is every tendency your loan transaction with them is not going to go smooth.
This is one of the pros of Payday loan that keeps the borrower happy, Payday loan generally are not concerned about your credit history, theirs is just for you to have a Payday and you get your loan. This for the borrower is like walking out of the crime scene of a crime you just committed with the police smiling at you.
- No collateral: Unlike the normal loan scheme where the financial institutions demand collateral, not demanding alone, they will value the collateral and ensure it is worth more than the amount you are getting as the loan.
The Payday loan requires just a few documents for the Process, which is an ID that is government issued, direct deposit card or an active checking account to get your loan. There are Payday loan agencies that do not require any document at all, you are just required to fill the Payday loan form online and you get your loan through that. No collateral required.
- No delay in processing: If you have applied for a normal bank loan you will understand perfectly what delay means, it can practically take you weeks to get a normal loan approved in financial institutions, not mentioning the procedure, when that manager has to sign, and this manager also has to sign. The Payday loan saves one the stress of going through all these procedures and delay. For the online Payday loan, you get credited in less than twenty minutes after application, remember you do not have to carry documents from one desk to another.
- Repayment is done automatically: Repayment is done automatically at the end of the loan term via bank transaction. The lender automatically debits your account as soon as you get paid, this does not only save you the stress of going to make payments, it also saves you from the risk of using the money for other purpose and ends up indebted to the financial institutions like the way it goes with other traditional loaning schemes.
- Short term: Payday loans generally are short term, so the borrower only needs to manage the lump-sum payment that is typically made between one to two weeks.
Payday Loans Pros and Cons (continued)
We have examined the pros of taking a Payday loan and give you reasons to apply for one, now let’s take a look at the cons of taking a payday loan.
- Zero effect on credit on credit rating: Just like as they do not check on your credit rating before they give out loans, your activities with Payday loan agencies do not affect your credit rating, so paying cash on time or taking cash advance will have no effect on your credit rating. The Payday loan might not be your best pick if you are looking for a way to boost your credit rating.
- High-interest rate: The interest on payday loans are very high relative to that of normal bank loans. You Know they say ‘ nothing good comes easy’ so if it comes easy it is not good, Paydays easy. Thet rate of a Payday loan is as a result of the fact that they are not properly secured and are short termed.
A practical proof that Payday interest rate is high is comparing the rates annually; standard bank loans are low relative to the Payday loan interest rate. This is essential to understanding Payday Loans Pros and Cons.
- Extra charges: There are fees applied if you default in payment. We know the local utility cardholder does same, but it is listed as a cons because one can easily neglect repayment of the loan, and wind up having to pay back more than necessary.
- Wrong collection practices: Some Payday loan agencies can go beyond the ordinary, many collection agencies can make mistakes and go beyond the charged they are supposed to legally tell a customer who is at default. This can be avoided by paying back your loan when you are supposed to make payments. Generally, one is advised to go through the Fair Debt Collection Practices Act and know your rights, so you know your stand.
- Short term and small amount: Payday loan are naturally short term in nature, and the amount given out is usually a small amount that can’t be used to finance a major investment. Getting a Payday loan for a massive long term project that needs time to gather up and make repayment is practically impossible.
- It encourages indebtedness: Payday loan encourages one to continue the cycle because of the ease in the process. Another factor that makes borrowers indebted is the high rate of interest and the high repayment installment, in several cases, the borrower will not be able to repay the loan by the given time. What is left for the borrower is to get another loan to cover the difference.
- Terms that favor lenders: The ease of the process gets borrowers to rush into the application without having to read through the terms of the loan when they even do they do not go through it properly, so clients can easily find themselves at a disadvantaged point if the transaction happens to go awry. Financial institutions can follow up the case legally to get their money back.
- Not really helpful: People generally get Payday loans when their normal income accrued to them is not enough for their upkeep, managing that income from month to month would really be a difficult situation, and the Payday loan comes, and you feel solution has arrived, but having a good thought of the situation shows that it gets you to be worse off at the end.
The interest paid on the Payday loan is gotten from your next paycheck, let us say you did not apply for the Payday loan against your next paycheck, what is the amount you are left with after the loan and the interest is paid, you are left to manage the remaining amount after the interest and the loan have been deducted, how then can you actually manage the remaining money when ordinary the complete money without any deductions was not enough for you. The Payday loan just gets you into a position that is difficult to opt out from since Payday loan money is the most time not invested to yield a profit that will be enough to pay for the interest.
Having seen the Payday Loans Pros and Cons, you now know how to go about your Payday loan that is if you are still applying for one. A large number of people have weighed the pros and cons of taking a Payday loan, and the pros outweighed the cons, so if you are comfortable with taking a Payday loan, do so with the knowledge on this site, so you will not be misguided. If you are not really comfortable with the payday loan there are other alternatives that can be swapped to that should suit you.
Though these loans offer simplicity, borrowers should check other options before they consult a payday lender. It is easier to fall prey for pay day loans because of the ease in the process of acquiring the loan.
Payday loans have a whole lot of benefits, but it still has its bad side, there two sides to every coin. Learn to be conscious of the pros and cons of Payday loan so you can manage it properly. Payday loans should be used of strict cases of emergency, like paying for the gas and electricity bills, cases that can not be left unattended to like health emergencies. If you apply this method, then a payday loan could be seen as a help scheme. But when it is used carelessly without a plan, the circle will just continue, and you will be in constant debt. These are the Payday Loans Pros and Cons. This article was brought to you by TFC Title Loans.