Payday loans are usually looked at with a fair amount of mounting suspicion and for a very good reason no less. The fact that the interest rate that is applied to it is absurdly high could possibly contribute to those concerns. They are meant to be given on a short-term basis and have absolutely no collateral attached, which makes them entirely unsecured. However, the interest rate is set on the basis of the amount of money that the borrower earns. Though most people have a fairly negative perspective concerning payday loans, it is only right that we take a peek on both sides of the curtain first before arriving at a conclusion.
Benefits Of Payday Loans:
- You Can Get Them Very Easily:
There are often times when we do not get to pick and choose just how deep we are in dire situations that bring about a wave of desperation. During such times we must consider what the lesser of two evils might be just to save our skin. Being strapped for cash and needing it in a definitive emergency just may lead to an agreement of a payday loan. If such a case arises for you, take note of the fact that you may even get the money within 24 hours itself. You may not even have to physically be present to complete the entire process as it can be done online.
- You Can Adjust The Amount You Want:
Sometimes cases occur where you may need a lower amount of money but since it is part of a bigger package, the entire amount must be accepted as a whole. If you have a specific requirement about the amount of money that you need to borrow make sure to look into a few different lenders so you can ascertain which one might provide you with what you need. This can help you pay off the money as soon as possible and not have to give up any late fees due to your timings.
- They Will Get Approved Easily:
Usually, when you get other kinds of loans you must be aware that they check your credit history as well as the current amount. If you have been unable to pay off your loans on time in the past, that may reflect badly on you and make the lender reconsider about giving you the cash. That is not the case when it comes to payday loans. The lenders here do not spare as much of a thought to your credit so you can get the loan easily even despite bad credit history. However, you must have some path of paying the loan back or things might go downhill for you right there and then. This also means that you do not have to opt for a hard credit inquiry that may have further brought your credit score down.
- The Requirements Are Lesser:
Getting large amounts of cash in a traditional way usually results in departing with excessive personal knowledge like your social security number as well as some sort of proof showing the income you are getting and a credit check among several other things. When it comes to payday loans, the level of convenience is heightened by the fewer requirements needed to secure them. Those may include a minimum age limit of being 18 years old along with having ID, a bank account, and a steady source of income. They do not bring past credit into the equation.
Drawbacks Of Payday Loans:
- Excessively High Interest Rates:
One of the first factors that draw attention is the fact that the interest rate is truly high. This can make the offer appear fairly unappealing and may leave you with little or no money to be able to pay them back. In the throes of desperation people generally do not consider all such aspects when they simply need the money in their hands. However, this can pose a lot of problems later on when there is no money even to pay the outrageous interest let alone clear off the entire debt.
- You May Get Caught In A Cycle Of Debts:
When you get caught up in debts without any clear route that you can tread on to pay them back, you know you are in deep trouble. That is often the case with payday loans as the copious amounts of money force people to either extend the time and suffer additional fees or borrow from someone else to pay these back. That simply means that they are indebted to someone else and still need to pay. This cycle is extremely hard to break out of once you step in.
- They Are Known To Be Predatory:
Lenders often see this as an opportunity that they can exploit. They do not care about your credit because even that gives them a chance to charge additional fees if you are unable to pay right then and need to extend the time. They know they can make a lot of money using payday loans by misleading borrowers and do not hesitate to do so. This may not apply to everyone but it cannot be denied that it exists.
- There Is No Assistance With Credit Building:
Though most of the loans require reporting being done to credit bureaus, as it is an important aspect while securing them, payday loans do not often do that. It is no wonder that credit does not play a huge role in where they are concerned. They may wound your credit score but it certainly will not take it up a notch.
One thing to keep in mind is that if you must take a payday loan, be sure to do it after careful consideration and only if you truly are in desperate need. Otherwise, it may land you in even more trouble than when you started out.