Let’s face it – money can be a devil at times and a savior at others. We all are told to acknowledge the importance of adequate money management throughout our lives to avoid the problems a lack of finance brings. That’s very crucial, without a doubt. However, some people might face a time they are in dire need of money, despite the sufficient money management they thought they were conducting.
There are plenty of loans available in the market to help you take care of your financial needs. However, almost all of them only allow borrowing a large amount and also have high-interest rates. What about when you need only a little amount of money? Well, that’s where payday loans come in.
A payday loan is basically a small loan that is short-term. You can acquire a payday loan to pay your urgent bills or whatever, and then you will be required to pay back the money. The name ‘payday’ is to suggest that you are supposed to return the money as soon as you get the paycheck on your next payday.
The payday loan industry has seen significant growth in recent years, but it has also received some serious criticism for various reasons. Nevertheless, payday loans are becoming more popular and they have their pros and cons. Let’s take a look at them.
Pros
Payday loans can be really useful.
When you need urgent financial assistance, you may find payday loans as the most suitable option. You can use the amount from payday loans to pay for due bills or any other expenditure that needs to be incurred urgently. You can return that small amount soon enough with your next salary. No matter how good you are at money management, some unforeseen circumstances in life may leave you with no other choice.
They are very easy to get.
The popularity of payday loans also has to do with their convenience. Almost anyone with a steady income, state ID, and a checking account can qualify for payday loans. You can expect to receive the amount within an hour or few hours of application and that can be considered as a huge plus. Some online companies also offer payday loans.
Even people with poor credit scores can get payday loans.
All the conventional loans require you to have a good credit score. That’s one thing that restricts people in times of an urgent need when their money management turns out not so effective. With payday loans, that’s not a problem as the lenders do not generally check the credit score of the applicant.
Cons
The terms of payday loans favor lenders.
Anyone who fails to comprehend the terms and agreement of payday loans can find themselves at a major disadvantage if something goes wrong and they are not able to pay back in time.
People often fail to meet the repayment terms.
The APR (Annual Percentage Rate) of interest on credit card loans is usually under 20 percent. In the case of payday loans, the interest averages to 300 percent when evaluated as APR. This means that payday loans are not a long-term solution and you must strictly avoid borrowing a bigger amount than what is absolutely needed.
It all comes down to personal preference. People who are confident of their money management and can easily meet the repayment terms can benefit from payday loans. Otherwise, other options should be explored.
