Payday loans have pros and cons; most people do not think about these as they just go out and get a payday loan. New borrowers should understand what they are getting into when the take out a payday loan. This article is for everyone who wants to try a payday loan.
Payday loans are so popular that you can find these loan stores in every neighborhood and on the Internet. The concept is simple: you want to borrow money against your up-coming paycheck, in a hurry, without a big hassle getting your loan. There are pros and cons of payday loans that you should be aware of before you get involved with a cash advance loan.
Pros of a Payday Loan
- No hassle as long as you have the proper documents
- Receive cash instantly, from $100 to $1500 or more
- Repay at your next payday from a week to a month away
- No credit check
- Almost anyone can be approved
Cons of a Payday Loan
- High interest fees
- Very short-term loan
- May be hard to get out of the quick loan cycle
- Habit forming for some people
If you have verifiable income, a bank account, and are an adult, you probably can get a payday loan. The loan term is very short, from about seven days to a month, until your next pay date.
Most people use payday loans for emergency expenses like car repair, a sudden trip, or to cover a check they wrote that will not clear the bank.
Payday Loans May Be Habit Forming
The biggest problem is that getting payday loans is so easy that it may be habit forming as an easy way to solve a financial crunch.
Getting out of payday loans is hard, especially if you have two or three outstanding at any one time. If they are large enough to take a substantial part of your paycheck, you may need to borrow another time or two at a lower rate just to get out of the loan. Meanwhile, you are accruing interest rate fees that can range from 350% to 2000%.
High Interest Payday Loans
Paying a very high interest rate of $15 to $25 per $100 or more may be acceptable for a short time, but if you have to roll the loans over and over again, you are quickly paying astronomical fees. There is no credit check, but there also is no benefit to be had for your credit record. Payday loans are used by millions of people every day, and apparently are here to stay.
These loan businesses are not subject to the same government regulations as banks, credit unions, or other lenders; they can pretty much charge you whatever interest rates you will pay. Like many other services, with payday loans there are pros and cons, and in the end the situation is one of buyer beware.