A payday loan often has a high interest rate and your previous payroll or records of employment will be required to facilitate the approval of the loan.
Since the process of getting a payday loan is quick and easy, payday loans have become very appealing especially for cash-strapped people who require a small amount of money to tide through the month. However, due to many misconceptions and misunderstandings surrounding this type of pay loan many customers have ended up misusing payday loans, aggravating their financial situation instead of improving it. With all the terms used by lending institutions such as fast cash loan, easy cash loan, instant cash loan and fast approval loan knowing the advantages and disadvantages of payday loans can help you to clearly distinguish them.
Most payday loan lenders will require a post-dated check, from the borrower with the amount borrowed and all fee charges included. The lender then gives the borrower the required amount and then holds on to the check to cash it in on the agreed date. This can also be known as a check advance loan or cash advance loan. This option is popular among people with low income, bad credit history and the ones who have no access to credit cards. Should you take up a payday loan? Below are some of the advantages and disadvantages of taking up a cash loan. You should consider these points carefully to determine if a payday loan is suitable for you.
- If you only need to be covered financially until the next paycheck, a payday loan is the solution for you. You should be able to estimate if you can comfortably repay the loan in the next paycheck and be able to survive on what is left of it.
- It is one of the easiest loans to obtain. This is because payday loans do not require you to have a credit history or a credit card. All you need is to be 18 years of age with a regular paycheck and a bank account.
- Most loan applications can be processed online, hence making it extremely easy and time-saving as well as eliminates the hustle of paperwork.
- Most payday lenders approve of loan applications and deposit the money within a day or two into the borrower’s account.
- Payday loans often have very high interest rates in exchange for the quick loan they offer which may shoot up to 300% and above Annual Percentage Rate of charge (APR) compared to other kinds of loans. If you are unable to cover the loan amount on your next paycheck the interest rate gets higher.
- Payday loans lead to a vicious cycle if you rely too much on it, especially when the due date is extended. Loan companies make a fortune from clients who do not pay on the due date as it attracts more fees and interest leaving one in a cycle of debt. If this is not taken care of it immediately, it leads to straining situations.
- Most money lending companies will tell you of the advantages and fail to disclose vital information in the fine print. Most borrowers have no time to scrutinize the fine print of the contract which leads to loopholes which are difficult to defend legally.
- While your lending company does not check your credit score, you have to ensure you do not default on your loan payment as your credit score will be ruined.
- If you are looking for a loan two times your pay consider other loan options as you will not be able to repay your loan when your pay comes in. This is not a feasible idea and other types of loans will be able to offer you better assistance.