As with any kind of loan, payday loans have both their good and bad points. And while many would argue that the bad points far outweigh the good, there’s still enough room for debate that people continue to get these loans. This article endeavors to display a bit of both and let the reader decide for themselves.
First, though, a quick definition. What is a payday loan? A payday loan is one in which the borrower goes to a lender and applies for a short, often only a few days long, loan. After a relatively brief application process the money is wired to the applicant’s bank account, and after a pre-determined period of time – usually no more than a few weeks – the borrower is expected to pay back the money. The cash, in short, is meant to get the borrower from one payday to the next.
Pros:
– It’s fast. Undeniably fast. When you need money quickly, you can get it through a payday loan. There’s not a whole lot to the application process, so in the event of an emergency you’ll be back on your feet in no time.
– And the application process is fast because there’s seldom ever any need for a credit check. Generally the lender only requires details of your employment history to approve a payday loan. Once they’ve verified that you WILL be getting paid this month, you get the money.
– They can be done online and off. There are tons of companies out there who offer payday loans, some of whom you may never need to meet in person. This further expedites reception of funds from the lender.
– They’re available to virtually anybody. If you apply and have a job, regardless of your credit history, you’ll probably get a loan.
Cons:
– Payday loans come with extremely high interest rates. The companies need these in order to ensure they get money off such a short-term loan – and as a result, if you don’t pay up in time you may be facing an enormous bill.
– They don’t require a credit check. This is both a pro and a con, as borrowers with poor credit often earned that poor credit through bad spending – and they’ll probably be digging themselves an even deeper financial hole if they fail to pay the loan off on time, which, in some cases, is a likely outcome.
– They’re illegal in many places. You may take out a loan online and discover they’re outlawed in your area. Brush up on local laws before making any commitments.
– And, last, they’re used as a front for scams in many cases. Not always, of course, but often payday loan offices will offer extremely low interest rates in order to lure in targets and then strip them of their money. Only deal with respected, accredited payday loan companies, and search online for honest opinions of these offices. This is especially important with online companies.