Payday Loans: A payday loan is termed as a check loan or a cash advance. These are on a short-term basis and are generally, secured against the next paycheck of an individual.
These loans work well in emergency situations and are the required solutions for the funds needed till the next paycheck. These loans are targeted to assist people with low income.
Pros and Cons of a Payday loan
Here are some of the reasons people take payday loans.
The major benefit of these payday loans is the ease of accessibility. Most of the cash lenders promise the funds within a time span of only 24 hours. Some of these loans are available 24 x 7 and with easy online applications, these loans are a boon for many.
Traditional loans require a photo ID, Social Security Number, a credit check, proof of income, and also the ability to repay the loan. This is not so with payday loans. The requirement for these loans is simple. All you need is an Id that is issued by the government, be 18 years of age, have a regular source of income, and also have an active bank account.
No Credit Check
When applying for a payday loan you need not worry about the credit check or even a hard credit inquiry.
These payday loans are not secured by personal property. This means if you are unable to pay the loan the lender can not seize your property.
Cons of the Payday Loans
Though the payday loans have a wide range of benefits, it also has a number of disadvantages that need to be taken into consideration before applying for the loan.
1.Payday Loans are Expensive
Not many are aware that taking a payday loan can work out to be quite expensive as these have a high rate of interest. It is, thus, advisable to plan on this loan only if it is absolutely necessary.
Payday Loans are Predatory
A predatory loan is a loan that is misleading, unaffordable, and unfair, and a payday loan is this type of loan.
Every time you roll over the payday loan you are charged additional fees. This increases out-of-pocket costs.
Lenders can sue
There is a possibility of you being sued by the lender if you are unable to repay the payday loan on time. These legal complications are definitely not worth the time and effort you will have to put in.
Some Alternative Options
There are other options you can choose instead of payday loans.
- a) You have the choice of using the credit card or probably, the credit card advance.
- b) Ask a family member or probably your friend for the required funds.
- c) Take out a small loan from the bank.
- d) Work with your creditor
- e) You can try for a Credit union Loan
- f) Request for the advance of your salary.
At the same time, if funds are an absolute requirement and other options do not seem to be working out, you can always go for payday loans.