Payday loans – the good and the bad

Payday loans are convenient and easy to get. Initially, they were created for emergency situations but they are accessible to anyone who meets the simple qualifications. Just like other conventional loans, payday loans have their ups and down

The pros

It is instant.

It is a very helpful emergency loan. Most lenders will approve your application almost instantly when you give the right and necessary information.  It can take a few minutes for some and 2 days for others, which is really not bad for loan approval. A conventional loan may take you up o two weeks.

The requirements are minimal

There are a few requirements when it comes to the payday loan application. All you need is an identification card or licence to prove you are a citizen in that state and an active bank account where the lender can deposit the loan when they approve it.  Setting up an account is easy when you meet these requirements. The lenders can also use the account to collect the payments when the loan deadline hits.

The processes involved are simple

Unlike conventional loans, the process of a payday loan application will be quick and simple. The registration of an account, application of the loan and the repayment are all done through the payday website. To register, all you need is access to a website through your phone or computer. There are several payday websites, when you have found the right choice for you, you create an account and apply for a loan.

You will not need to travel for hours to the lender’s physical location to get your loan approved. When your application is approved, the lender will wire transfer the money to your credit or debit card or they can just deposit the money to your bank account.

The timely benefits

Paying a payday loan on time will automatically qualify you for a higher loan limit. When you pay your loan weeks or days before the deadline, the lender automatically qualifies you for an amount that is almost double your previous loan limit. Consistent timely payments will qualify you for bigger loans which can be beneficial in the long run.

The cons

The time limit is short

This loan can expire within two weeks or three months depending on the terms of the lender. To avoid major consequences, you have to make the repayments on time. If you do not beat the deadline, interest begins to grow o your loan until you make the full payments.

A payday loan may have some negative consequences on your credit card report. The late payments will reflect on your credit card history, causing your points to drop. The payday loan is not linked to your credit report directly, but it can reflect on your bank account which is linked to your credit report.  When you have too many late payments, your credit score will drop and lenders will not approve any conventional loans. The interest rates on a payday loan are much higher compared to any kind of loan. This means they are very expensive. The lenders impose the interest immediately when you receive the conventional loan.

Alternative to Payday Loans 

One alternative to payday loans is a personal loan. Although they are similar in the sense they are both loans, you are able to borrow more for longer with a personal loan. This could be a better option especially if you were wanting to borrow more than a payday loan can offer. 

More:

Next Post: How to detect and avoid fraudulent payday loan lenders – click here.