Are Payday Loans Bad? To weigh the pros and cons
Getting a payday loan is not an easy decision, but there are times in life when you might need the extra cash to reach that next paycheck. Payday loans are given in small amounts, ranging from a few hundred dollars to a few thousand. These are short term loans, and the repayment is usually made for the next payday, or shortly thereafter. Payday loans are also called âpaychecksâ or âcash advancesâ, short term or quick loans.
The biggest question behind these short term loans is “are payday loans bad?” ”
Are Payday Loans Bad?
Payday loans have some definite advantages as well as some disadvantages that you should consider before getting one. They can get you the cash you need, but is it bad to take out a payday loan?
Consider these things:
One of the main selling points of payday loans is their affordability. You don’t need to have a lot of credit, or even a good credit score, to get one. The most important thing is a stable income and a way to prove it. For this reason, many people who cannot take out loans from traditional lenders choose payday loans when they have urgent expenses.
Likewise, if you are concerned that a credit check is interfering with the credit you are working on, these loans often do not need a credit check.
Payday loans can be easier to obtain, but they also charge for ease of access. For example, most interest on credit cards or personal loans is as high as 30-36% (depending on credit history, warranty, etc.). Some even have an interest as low as 4%. Payday loans are profitable because of the interest they charge, which can reach an average of 400%.
In some cases, paying that extra interest is worth getting the emergency funds you need. If you don’t understand the terms or how the interest accrues, you can end up owing a lot of money. If you make your repayments on time and know how much interest you’ll owe, this can be a manageable tradeoff.
Payday loans provide cash when you need it most. It’s just important that you use them when it’s appropriate. Wanting a new TV isn’t the same as having to pay a medical bill or keep the lights on. Most payday loan funds are deposited directly into your bank account, often within a day or two of approval.
Some lenders even offer same day payday advances. If you have an emergency, you can fund it quickly. Keep in mind that you will always be paying interest with your repayment, so if it is a âwantâ and not a âneed,â a payday loan may not be the right solution.
After considering the most important aspects of payday loans, are they bad? Any financial decision you don’t make for the right reasons, or without understanding it, is a bad decision.
When you understand payday loans, you can make the choice that you need for your situation. Payday loans can help you get through tough times and emergencies. They’re not bad, but as a responsible lender you need to make an informed and responsible choice before you borrow. In case you are interested, you can find more information here.