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Pros And Cons Of Payday Loans

By definition, payday loans are unsecured short-term loans. They are also referred to as cash advances, cash advance loans, paycheck loans, etc. The payday loan company you approach will give you a loan that is limited to the amount of your income and expect you to repay it along with the applicable fees and interest on your next payday.

Payday loans are easy to apply online and the payday loan process is so quick that you can expect to receive the money into your account within a few hours.

These instant loans do not require credit checks. You only have to provide your personal information related to your bank and job, to get $ 500 transferred to your checking account within a very short time.

When you apply for a payday loan, you will give the lender a postdated check made out for the loan amount plus the fees. The lender will transfer the loan amount to your bank account and encash your postdated check on the day your loan is due. The loan period is usually 2 weeks or till the next payday. If repayment is delayed, you incur extra fees and charges.

With the above in mind, the following are the pros of a payday loan:

• Payday loans are a good source of quick cash in an emergency when you can't wait until your next payday. In that sense, they can be a boon.
• If you have pending bills, and you are stuck for cash, a payday loan can help you avoid late payment fees, helping to maintain your credit rating.
• Payday loans are very easy to get. The payday loan process itself only involves completing a simple application form.
• The eligibility criteria are minimal with the lender only needing your name, address and checking account information.
• A payday loan is quickly transferred to your checking account within hours of applying for it.
• A bad credit rating and previous bankruptcy are acceptable when you want a payday loan.

Here are some inherent disadvantages of going in for payday loans:

• Payday loans are restricted to small amounts. Some state regulations might allow $1000 while some restrict it to $400. If you need more, you can't get it.
• Suppose you delay your payments beyond the due date, you can take an extension but you end up paying as much as 60% of the loan amount in fees alone. When you need a bigger loan urgently, payday loans are not the best idea since repayment can become a problem.
• Payday loans may be quick cash, but rates of interest are exorbitant. Depending on how desperately you need the money, it might be more sensible to go in for conventional long-term loans.
• Payday loan companies can be ambiguous about their terms of agreement; so much so, you could actually pay all the charges twice. It gets worse if you allow automatic deduction from your bank account or paycheck. It is necessary to understand the terms and give clear instructions.
• You can be accused of criminal charges if there are not enough funds to cover the post-dated check you give the lender.
• Some lenders can be downright rough when it comes to collecting the loan, harassing the borrower and slapping heavy charges on them.

These days, payday loans or cash advance loans are possible to get online, through fax or email. What you need to watch out for is not to roll over your loan or extend it as this can pull you into a whirlpool of debt. A payday loan is best taken when you are very sure about paying back the entire amount on the due date.