Arguments for and against payday loans
If you know that you have a lot of bills to pay in the upcoming months, it is important to think about how you are going to pay them. Many people know that they do not have enough money to pay their bills and they’re looking for potential ways to alleviate their financial hardship. Many people use payday loans to reduce their debt. Before you get a payday loan, it is important to know the benefits and the disadvantages of this financial product. The following paragraphs will discuss reason to get a payday loan and reasons not to get one.
Benefits of payday loans – Getting your money early
There are many benefits of getting a payday loan. One of the main advantages of getting a payday loan is that you are getting your money early. If you have a credit card bill due five days before receive your paycheck, you will end up paying a lot in late fees. If you were to get a payday loan, you would be able to pay your credit card bill on time and avoid late fees. You would also keep your credit history in tact by avoiding a late payment.
Fast approval process
Another advantage of a payday loan is the fast approval process. Unlike other kinds of loans, payday loans usually provide customers with an approval notice during the same day the application was taken. If you need money fast, a payday loan is definitely the loan for you. Most payday loan companies are able to give you a check or wire the money to your bank account within an hour. The same can’t be said about other kind of loans.
No credit history required
If you have a bad credit score, you can still get a payday loan. Payday loan companies do not take a bad credit score into account much. As long as you are able to supply the payday loan company with proof of employment, you should be able to get a loan.
Quick repayment period
While some people might consider a short repayment term a negative aspect of a payday loan, it is actually a benefit. By only having a short amount of time to payback the loan, you will decrease the amount of interest you have to pay. Also, you won’t have to worry about setting aside part of your paycheck for months on end just to pay back the loan. If you are in need of another loan in the future, you’ll be glad that you already have your first loan paid off.
Since a payday loan is unsecured, you don’t have to worry about using your car or your house as collateral. Many people do not like taking out loans because they have to put their car title up as collateral. Fortunately, this isn’t the case with payday loans.
Disadvantages of payday loans – interest rates
The biggest disadvantage of a payday loan is the interest rate. The annual percentage rate on a payday loan is usually three to four hundred percent. This is extremely high and impacts the customer’s cost of borrowing. The reason that the APR on payday loans is so high is because it is an unsecured loan. The riskier the loan, the higher the interest rate will be. Many people default on their payday loans, which causes payday loans companies to raise the rates on everybody. Payday loan companies need to spread the loss out and rates will continue to rise as long as people default on the loans. In order to avoid the high interest rates, make sure that you pay back your loan on time. If you pay on time, you will avoid the high interest rates.
Another disadvantage of a payday loan is the fees. There are many fees associated with a payday loan, so make sure that you read the fine print. Most payday loan companies will charge you anywhere from fifteen to twenty five dollars for every hundred dollars that you borrow. When you are deciding how much money to borrow, make sure that you take this into account. If you have a credit card, you might be able to get a credit card cash advance and avoid paying as much money in fees.
Now that you know the arguments for and against payday loans, you should be able to decide whether or not this financial product is suitable for your needs. For many people, the benefits of a payday loan outweigh the negatives. If you know that you will be able to pay your loan back on time, there aren’t many disadvantages to getting the loan. However, if you aren’t sure that you can pay back your loan on time, you should look for another way to get the money you need. If you don’t pay your loan back on time, you could fall into a debt trap.