Pros and Cons of Payday Loans
What is payday loan?
Payday loan is short term loan until borrower’s next payday. Payday loan is another term of cash advance. It is usually a loan for the emergency situations, such as: illness, disaster and other instant cash needs. Typical loan’s term is about two or three weeks, but it’s possible to restructure you loan for a next term. Usual amount of such loan type is 100$-1500$ and only some special lenders could give you more then 1500$. Another feature of payday loan – is a high interest rate, it’s really big if you compare it with usual loan type. This rate is about 390 – 900 percent per year!
Payday Loan Process
The process of the loan is very easy – you have to do the following steps:
- Choose the best lender for your situation.
- Calculate your expected loan payment, to be confident, that you’ll have possibility to pay for your loan.
- Investigate terms and agreements of online payday loan service. It’s very important step, because the loan conditions various greatly form service to service.
- Fill online application form. Usually it’s an easy form with your personal information. In some services you have to send some personal documents by fax.
- Wait for approve. Typically from 15 minutes to 1 day (it’s also different form lender to lender).
- When approved, you’ll receive your cash next business day on your saving account.
- When term of loan due – pay your loan amount and rate for payday loan use.
Pros & Cons
So, really, it’s fast and easy, but very expensive way to cover your financial needs. But as any another loan it has its own advantages and disadvantages.
Payday loan advantages:
- Fast way to receive extra cash.
- Easy application form for payday loan.
- For many lenders your bad credit history is not a problem.
- You needn’t send you personal document by fax for many services.
- Online application process and approve
Payday loan disadvantages:
- High fee rate for payday loan use.
- There is some risk to fall into “debtor’s prison”
Therefore, it’s much better to have some cash resource for unpredictable life situations or use some other (no payday) loan type, but if you have no cash resource and you have bad or no credit history – payday loan is a kind of help for you. As you see, main payday loan disadvantages is the high fee rate. So, payday loan is NOT recommended unless you are in a very emergency situation, and you know how properly calculate your future income to pay your loan when the term is due. After all, the best advice is save your money for a rainy day.
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