What Are The Pros and Cons of Payday Loans
When used responsibly, a payday loan is an excellent solution to a financial emergency. However, as with most financial products, there are advantages and disadvantages of getting a payday loan.
It is therefore important that a prospective lender appraises himself on the pros and cons of a payday loan so that he can evaluate whether a payday loan is the best loan option for him based on his current financial standing:-
Pros of Payday Loans
- no credit check.
- payday loans are usually dispersed quickly and it is possible to have your money the same day you apply.
- arrangement and processing is discreet and only yourself and the lender know about it.
- you can apply on the internet without having to leave your house.
- sometimes payday loans can be cheaper than an unauthorised overdraft.
- the process is fairly simple and straightforward.
- payday loans can actually help rebuild your poor credit rating if you pay them on time.
- some lenders do not require you to fax documents and need minimal supporting paperwork.
- repayments are automatically deducted from your bank account.
Cons of Payday Loans
- pay day loans cost more in comparison to other loans including cash advances offered by credit card companies and traditional banks. This is to factor in the lender’s higher risk in offering payday loans.
- may cost even more when extended or rolled-over.
- if a post dated check written to secure the payday loan is unpaid, both the lender and your bank might charge you additional fees, not to mention the possibility of risking an adverse credit rating.
- you may find yourself caught up in a cycle of debt if you choose to pay only the interest charges at the end of the life of the payday loan.
- in states like Carlifonia, payday lenders are virtually unregulated, which can lead to unfair practices.
- the loan amount is usually very low – the maximum amount you can borrow is usually regulated by state laws and in most states; it is up to $400-500 only. However, some states do allow up to a thousand dollars.
- missing repayments can affect your credit rating.
It is thus important for the lender to evaluate the benefits and risks of obtaining a payday loan facility.
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