With increasing global demand for different products, the prices just keep getting higher than usual all the time. Not only are luxuries expensive but even the necessities are heavily taxed in most of the countries. It makes living conditions for lower-income groups burdensome to survive. If you’re ever suffering from a budget constraint you’ve probably thought of applying for a loan. Though it may temporarily solve your problems before applying for one you must understand and abide by all the conditions put forth by the lender. Failure to comprehend some of the terms may lead to you losing more than you anticipated.
You are probably aware of the term ‘Payday loans.’ If not, these loans are one of the fastest methods out there to receive instant cash if your expenses are going a little too heavy on your pocket. Payday loans work by you applying for an amount that is not more than the next paycheck you will receive basically, the lender provides you with just enough money that amounts to your monthly salary usually lent over a short span and requires you to pay back the lender by the time you receive your next paycheck, which shouldn’t take longer than a few weeks. This temporary loan does not help you to finance assets such as cars or land but instead, it is an immediate form of money, especially when you’re going through an emergency. Therefore, you must carefully assess the pros and cons this loan could possess and whether or not it is worth applying for.
#1 Nullify credit scores
Just like most loans often need you to provide information about your credit scores and your past credit history, payday loans tend to exclude this factor and pay no heed to your credit scores or how your previous performance has been in terms of lending and paying back the loans you’ve previously applied for. If your credit scores are not in good shape, it is less likely that your request for another loan will be approved, but in case of payday loans, lenders are more concerned with your ability to pay for the loan based on your recent pay scale.
#2 Instant form of receiving cash
A big plus payday loans have is the fact that you can receive the money in not more than 24 hours. The payday loan application process takes around 30 minutes and after your request for the loan has been approved, you don’t need to go around trying to arrange instant cash as its most likely that the cash will be available to you within a day. The application process isn’t too complicated and rarely involves paperwork. You can apply for Payday loans online at any time and you don’t need to wait an entire day before receiving your loan from the bank, in case it’s closed.
You can apply for payday loans from the comfort of your home at any time or day. All you have to do is fill the form and just take a decision. You don’t have to go through the hassle of meeting people and fulfilling requirements. You can either directly collect the check or even have the amount transferred to your bank account.
#1 Higher interest rates
Payday loans are a type of unsecured loan. Therefore, the rate of interest is generally higher compared to other short-term loans and facilities. Sometimes the overall amount tends to be so expensive that there is a good chance you might not be able to pay back the loan in time with the interest given. It can even be compared to credit card rates of borrowing.
#2 Not a solution to your financial crisis
The bitter truth about payday loans is that it makes you want more. You end up being caught up in a spiral of applying for one loan after another. And if the loan tends to be expensive or if you may seek difficulty in paying back on time the borrower often ends up applying for another loan to pay off the initial payday loan. This leads to a severe debt crisis for you in the long run.
#3 Less transparency
In most places, there are not yet enough laws that have been passed out to protect consumer interests. Payday loans are sometimes exposed to fraud due to unregulated rates of lending. Payday loan organizations tend to set out their own set of rules and you may come across ghost companies or brokers that take advantage of your financial situation and add even more to the already high-interest rates.
Payday loans require paying back for everything in one hefty amount with no ease of installments, in case you miss the repayment date or are not able to pay back your loan, you may end up paying up for more than you expected and at worst cases you could even be sued by the lender.
The Final Word
You must consider all the terms involved when it comes to applying for a payday loan. Usually, it is not recommended and based on past consumer experiences, the disadvantages outweigh the positives. It is generally not worth the risk and should never be considered as a financial resort in the case of funding a luxury or anything that has to involve your leisure. Look out for hidden fees before you apply for the loan. It’s best to seek advice from anyone who may have any experience with loans as delicate as this one.