During times of financial difficulties, payday loans become very handy in helping you fix your short-term lack of funds. Usually, these loans have a repayment period of mostly two weeks which can continue for a couple of months unlike loans from banks which you can pay over some years. Furthermore, one does not have security against which the credit is granted, and it is for this reason that these loans are gaining fame. However, these loans have very high interest rates in comparison to bank loans or credit card advances; thus before taking these loans, it is necessary to understand the pros and cons of taking these loans.
Pros of Payday Loans•
A day after requesting the loan, the lender would avail the loan and deposited into your bank account. It would be hugely convenient in case of an emergency, and thus you do not have to go through the hassle of gathering the funds from friends and family.• Applying for payday loans is relatively easy and quick, with most people taking a maximum of thirty minutes to complete the application process. What one should submit during the application process include a government-issued ID, an active bank account and your previous two pays stubs to begin the loan’s processing. The application can be made online or over the phone, and upon approval of the loan, it is deposited into your account.• Getting approval for these short-term loans do not go through many barriers in comparison to banks and other financial institutions. It is because unlike banks, the lenders rarely bother to look at your credit rating which would bar others from accessing the needed finance. However, they will assess your loan-paying ability using the most recent pay stub which you will have provided and calculation of the amount to be given is based from that. Reputable and good lenders ensure they always avail to the lenders an amount they can pay with ease, which is an excellent business practice.
Cons of Payday Loans•
Due to payday loans being short-term loans and are unsecured, these loans come with extremely high interest rates in comparison to loans from banks. Moreover, the loans have a short repayment period as compared to a standard bank loan.• In case you fail to repay the loan on the stipulated time, the lender allows you to extend the period in which to pay back the loan. It throws you into the vicious cycle of debt which is tough to break leaving you in a scenario of always trying to catch up with completing the loan’s repayment.• Individuals with poor credit rating are usually the targets of payday loans. Subsequently, the lenders have provisions that favor them in the event you default on the loan repayment. Thus before taking out these loans, always ensure you go through the loan contract wisely and make an informed decision.• The collection practices specifying your rights as a borrower are frequently vague and do not clearly outline your rights. Therefore in the event you fail to repay the loan, know what the collection agency is working for the lender is expected and not to harass you. Most agencies bother borrowers beyond what the law expects thus it is crucial to know your rights as a borrower.
Taking the route of taking payday loans is one you should always avoid despite them being easy to secure. If need be, a personal loan or a credit card cash advance is a better option due to favorable interest rates unlike the interest rate charged by payday loans