The Pros And Cons Of Payday Loans
The conventional way of availing the loan money from credit institutions like the banks could be time-consuming due to their lengthier formalities, need for a collateral, credit check and so on, and would certainly not be suitable when you are already in a financially tight situation to meet your immediate expenditures like the medical bills, house rent, and other debts that could never be postponed for whatsoever reasons. In such scenarios, many people would prefer resorting to the short term personal loans like the payday loans, the line of credit etc. that neither ask for extended formalities nor demands a credit check and yet, offers you the loan money as immediately as enough to save you from the pitfall.
Among the prevalent short-term loan types in the market, the payday loan type is quite popular for both its positive and negative aspects and, it is as welcomed by some as being disapproved by the others. Any loan type come with both pros and cons and this payday loan type is not an exception and if you are planning to avail this loan type for your emergency purpose(s), then it is better to understand thoroughly about its pros and cons so that you would know what’s in store for you by availing it and at the same time, when you fail to meet the deadlines.
What is a payday loan?
Payday loans are short-term loans, received usually for smaller amounts and that too for emergency financial purposes, and are often due by the borrower’s next payday. Few payday loan companies either ask you to permit them to withdraw the money you owe them from your bank account, on the due date or may demand you to write them a post-dated check for the money you had borrowed from them plus the interest and fee if any.
The pros of payday loans
Unlike the conventional long-term loans that demand few days of formalities and lengthier paper works, the payday loans are quite quick with fewer formalities and ridiculously simple paper works, sometimes just the filling up of the application form and is, therefore, breezy, especially when your financial condition is demanding. The documents that are generally required to avail the loan are your ID, employment details like the pay slip, your address proof etc. Even there are few companies that operate online that saves a considerable amount of time for you and is a welcoming relief in your emergency.
Once the approached loaning company checks your suitable documents and accepts your plea for availing the payday loan, within few minutes to few hours or maximum a day, the requested loan amount quickly gets transferred into your bank account with which you could overcome your immediate financial burdens.
Unlike the traditional loan types, the payday loan never expects a collateral from you for availing the loan and rather expects only a post-dated check or the access to withdraw money from your account, on the promised due date.
No credit checks
Your bad credit score would never come in the way of availing a payday loan, as payday loan companies do not care about your credit history for offering you with the loan money, which is unlike the conventional loans lending companies that require deeper investigation on all your possible credit histories and scores.
Your privacy is valued
All that is required are few basic documents to approve your payday loan and these lending companies never demand an explanation or the purpose for which the loan is availed, as they understand your emergency and dismiss annoying questions, considering your situation and at the same time valuing your privacy.
The cons of payday loans
Owing to the faster approval process and fewer formalities, that too without any collateral, the payday loan lending companies place a huge interest rate that could be burdening when you cannot repay your loan amount on time. The APRs range from 400% to 750% normally, and hence, before availing the loan one should understand his/her position thoroughly and their ability to repay the loan amount on time, which saves them from further exorbitant fees and charges that could be certainly devastating.
Unsuitable as the long-term solution
As the interest rates are exorbitant, it is advisable that you resort to the payday loans only on emergency and never ever prepare to use it as your long-term financial solution, which could lead you to face more amount of debts than that manageable by you.
Understanding the situation of desperate borrowers, there are many fraudulent payday loan companies that shamelessly loot the people’s money by insisting humongous interest rates than the norm and or inducing ridiculous charges and fees that are not in accordance with the customary payday loan policies. Hence, if you are planning to avail a payday loan for your emergency purposes, always approach a licensed lending company to avoid losing your hard-earned money.