Payday loans, also known as payday advances, paycheck advances, or cash advances, are given to a borrower against their future paycheck(s). Listed below are some of the pros and cons of this type of loan.
The Pros:
- Payday loans allow people to get up to $1500 within 24 hours depending on your country.
- People that have a bad credit history, or even no credit,will most likely be approved for a payday loan as long as they can prove some type of income.
- The only proof that you will need is one that verifies that you are employed and will be able to repay the loan amount.
- For whatever the reason you need this money, a payday loan allows you to get the cash almost instantly.
- Payday loan applications are very simple. All that they require are a few personal details and your banking information.
- The payday loan process is very fast and takes less than 30 minutes, after which the loan amount is deposited into your bank account usually within 24 hours. They can even be applied for by fax, email, or online.
The Cons:
- The biggest disadvantage of payday loans is the very high interest rates. The interest rates are typically in the range of 15 to 30 percent of the amount of the loan for a two-week period, which translates to rates ranging from 390 percent to 780 percent when viewed as an annual percentage rate. The interest rates are so high that it can make borrowers feel like they are losing their next paycheck just to payback the loan.
- Another big disadvantage of payday loans are that they can be made in only small amounts. The maximum limit for payday loans varies from country to country, anywhere from $500 to $1500.
- For people opting for payday loans, it is important to realize that they are accountable for paying back the entire loan amount plus interest, as failing to do so can affect your credit score negatively.
- Fourteen days is normally all that you get to payback the loan. If an extension is needed, you will end up paying a much higher amount than what you originally borrowed.
- Seldom are the payday loan terms and conditions clear to a borrower that is in need to borrow money quickly. You may end up paying charges double or even triple, particularly when you allow your lender to deduct your loan charges directly from your salary.
Hopefully you will never need a payday loan, but if you do, you should check the authenticity of the firm offering the loans. You should also know who offers the best loan terms, so please do your due diligence before taking out one of these loans.
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