Typically, payday loans are funds that you can borrow from a financial institution and return them within two weeks. The amount that you can obtain ranges somewhere between $ 1000 and $1, 500. You can term it as a paycheck advance, short-term loan, bad credit loan, cash advance, or fast loan. If you are in an emergency or have a poor credit score, you can access the loan seamlessly. Let’s explore the benefits and demerits of the loan in detail.
Benefits of Payday Loans
There are reasons why many people in the United States turn to a payday loan. It comes with bountiful benefits, as you can see below.
1. Lenient Requirements
Payday loans don’t need SSNs, proof of income, and photo ID to process the loan. You can obtain the money if your above eighteen years of age, have a valid bank account, and a regular job. You will also need to produce your ID card to get the fast cash. The highlight is that you don’t need a definite credit to get the money. No one even checks your credit history as part of the process.
2. Ease of Access
You can access the loan effortlessly within 24 hours if the lender finds you fit for the loan. Plus, you can apply online without meeting the lender physically. If you are in dire need of a quick loan, you can get it within a short time.
3. Unsecured Loan
The payday loan is unsecured, meaning that you don’t have to offer collateral, such as a car or house. Therefore, you can rest easy since no party will seize your property if you fail to repay the debt. It is the utmost advantage that the type of loan has against traditional lending.
Demerits of a Payday Loan
In as much as the loans offer you the much-needed reprieve for quick money, they come with risks and demerits. Please have a look at them as you ponder your next move.
1. Quite Expensive
A payday loan is costly since it has a high-interest rate that amounts to 400%. For instance, personal loans attract an interest of 4 to 36%, while credit card interest can go up to 12% to 30%. Some states charge higher than others; hence, you need to be keen on where you reside.
2. Prone to Lawsuits
If you don’t repay the money on the due date, the lender can sue you for failure to honor the agreement. Bear in mind that you will have to pay legal fees in the process, which is expensive. Plus, you might go to jail, and your reputation will be tarnished.
3. You can enter into a Debt Cycle
Even worse, the lender can extend your repayment days and charge you additional fees in the long run. It only means that you remain indebted to the organization until you find the funds to complete the payment. Typically, you will be in a trap or a cycle of debt that you can’t seem to get out of it.