The Facts About Payday Loans: Pros and Cons

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Payday loans are used as a resource when you have an immediate need for cash for a short period of time.  Perhaps you do not have a credit card with enough available credit and you have no savings put aside and there is no one from whom  you can borrow for a short period of time.  Yet you still need to cover a car repair or medical expense or some other emergency or pressing expense.

There may be some advantages to using a payday loan.  A payday loan is somewhat similar to a cash advance.  Payday loans are for the short term and should be paid off on your next payday.

Applications for the payday loan are simple to complete.  The application can be approved in a short period of time and it may be possible to receive your needed cash in about an hour.

There are no credit reports needed when you apply for a payday loan.  You need to prove you have enough income coming in to cover the loan.  The amount you can borrow from the payday loan company will depend on the amount of your regular income.  Most payday loans are for amounts less than $1,000.  To qualify you may not have defaulted on any previous payday loans with any other companies.

Payday loan companies are usually open longer hours than other financial institutions and you can apply for some payday loans online.

 

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You may use your payday loan for any purpose you choose whether it is to cover an emergency or to avoid a late fee or to cover a check  you have written and avoid a fee for a bounced check

You can pay off your payday loan earlier by paying the lender cash for the total amount due.

Although there may be some advantages to a payday loan if you need one, there are also some disadvantages.

When you take out your payday loan you either write a check dated for the day your payday loan is due or you give the payday loan company the information they need to take an electronic payment from your bank account.

There will be a finance charge and interest fees added to the amount of the loan and these charges can be high.  On a $100 loan the charges may run anywhere between $15 and $25.

If you cannot pay the loan on the day it is due you can arrange to pay the finance charges and roll the loan over till next payday.  Of course, you will need to pay another finance charge. You can see that it can be very easy to get into financial difficulty if you keep rolling the loan over and paying more and more interest.

You need to be employed full time to qualify for a payday loan and you need to have a current bank account.

Payday loans are usually for small amounts or lessand are meant to be for a short period of time.

If you plan to apply for a payday loan be sure to do some research especially if the company you plan to use is an online one.