You are here

Before You Apply: Should You Take Out A Payday Loan?

niallrice_z5511evw's picture

Payday loans are regarded as a useful tool for borrowing fast money. If or when used correctly, one can even have a positive experience with them. Though the payday loan may seem so appealing, truth is that some people have had their personal finances almost completely destroyed and fallen into huge amounts of debt. Before making the decision to apply for this type of loan, it’s wise to weight both its pros and cons.

Advantages and disadvantages of payday loans

Advantages

1. Relatively easy to obtain

Unlike the traditional loan, the payday loan does not require any credit check or for the applicant to have access to a credit card. If you’re above eighteen years, with a monthly salary & access to a savings account, you’re eligible for this loan.

2. Fast & convenient

Today, you can apply for the loan from the convenience of your home. The majority of payday loan lenders allow online application, cancelling out the hassle of filling out the paperwork that comes with other loans. Once you submit, you will be reviewed and approved shortly after. The funds will then be deposited into your bank account within several hours or days.

3. An option if there are no others
If you’re in a financial problem & probably have no other option than a loan that can cover you until the next paycheck, the payday loan may be a solution to consider.

Disadvantages of payday loans

1. Very expensive

Payday loans are typically more expensive than other types of loans. In fact, the interest on the loans can range at between 300% & 900% APR! Because of these large costs, it can be tough to get out of a payday loan, and that’s why it’s highly advisable to repay your debt prior or on the due date. If you’re unable to pay back the loan within the agreed period of time, you could be facing interest rates that continue to skyrocket.

2. Deception by lenders

Some payday loan lenders can be deceptive in the kind of information they disclose. Since they know that it’s difficult for the majority of borrowers to defend themselves under the law, these lenders will often use misleading marketing material or even look for loopholes in the contracts signed by their customers.

3. Possiblity of falling into a vicious cycle

It’s reported that a large chunk of the profits made by payday loan lenders come from customers who are unable to repay previous loans on the maturation date and so end up extending the loans. But doing this leads to high fees being added to the original amount borrowed and, if passed to the next payday, can result in extreme debt.

User login