Payday loans are getting popular for people who need immediate funding for any emergency expenses, especially nowadays when there is a global financial crisis going on. A payday loan offers a financial solution by providing quick cash even for people with bad credit.
However, a payday loan is a not a one-size-fits-all solution because there are certain things that borrowers must consider.
Here’s why many people decided to take payday loans, despite the usual negative connotations:
PROS of Payday Loans
#1 Few requirements. Compared to traditional loans, a payday loan has significant few and basic requirements. Traditional lenders will usually require personal ID, Social Security number, proof of employment and income, and a credit check for them to see if you are financially capable. In payday loans the requirements are quite basic:
- Mus be at least 18 years of age
- Government-issued ID or Social Security number
- Regular source of income
- Active bank account
#2 Very easy to access. One of the best advantages of payday loan is that it provides quickest and easiest access to cash funding. The usual release of loan amount is within 24 hours therefore you can get the money you need quickly. Most payday loan lenders are also available 24/7 and accessible online. Interestingly, loan apps can quickly process loan applications in as little as five minutes.
#3 No credit checking. People with bad credit can easily take a payday loan since it does not require credit history.
#4 No collateral needed. Another key feature of a payday loan is that it falls under unsecured loans wherein it does not require any collateral. This will benefit the borrower since his property or car will not be at risk if ever there is failure in repayment.
CONS of Payday Loans
#1 Payday loans have high interest rates. What makes a payday loan incur a higher interest rate than the usual traditional type of loans is the fact that this falls under the unsecured loan category. This is one way for the lenders to balance off the risk they take when they approve an amount for a loan.
#2 Tendency to get trapped on a debt cycle. With higher interest rates and short repayment period, borrowers have the tendency to rollover or request for a loan extension which will incur additional charges.
Just like any other loans out there, there is always a good and a bad side to borrowing money. It becomes a good idea to apply or take out a loan if you will use the money to fund emergencies, daily necessities, for business or investment or to pay off a loan with a bigger interest rate, popularly known as debt consolidation. Loans and debts aren’t bad if your goal of having one would make your life better or would help you reach your financial goals. Remember that taking out a loan or having a debt is a huge responsibility that should never be taken for granted. The only way to be responsible is to pay your dues on time or before the deadline or pay in full before the term matures. If you will not be responsible enough, your loan can break your finances and will give you a lot of troubles in life.