Without having to go through a cumbersome process of applying for a loan, payday loans have become the most popular form of immediate financial aid to people. Several financial problems such as medical bills and utility bills can be paid by getting payday loans. However before relying on these loans, it is imperative that the benefits and costs are studied to make appropriate decisions. This article sheds light on the benefits and drawbacks of small payday loans in a neutral manner.
Benefits:
Immediate approval- The most addictive part of these loans is their immediate approval. It does not take more than 24 hours from applying to getting the loan credited in the borrower's account. In some cases, it hardly takes even 12 hours. Instead of waiting for several weeks, your loan application is immediately approved.
No relevance of credit score- Banks check the credit score of their loan applicants. Based upon this score, banks then decide to whether approve or disapprove the loan amount. In the case of instant loans, credit score is not a decisive factor to be determined by the lending authority. In fact, most of the applicants applying for short term loans have a very bad credit history.
Drawbacks:
Very expensive loans- As compared to a typical interest rate of less than 15%, payday loans have interest rates starting at 30% or higher, which makes these loans very expensive to repay. Payday lenders usually provide a ballpark estimate of the principal amount plus the interest expense to be paid within 30 days deadline. If you fail to repay within the time limit, interest expense keeps on increasing.
More debt- In simple terms, the inability to repay a payday loan increases your debt level and there comes a time when the repaid amount is often 10 times greater than the borrowed amount. Instead of getting out, you are further getting buried under heavy pressure of debt.
Very addictive in nature- The quick application approval process of these loans make them addictive in nature. Unfortunately, this has become a habit for many borrowers who are just unable to pay the rising debt on time. Do not indulge in this habit.
Concluding, it is better in cutting down your unnecessary expenses rather than borrowing funds to finance your luxuries. Loans are never a good option for anyone. Make use of these loans very wisely or you could end up in a big financial stress.
Benefits:
Immediate approval- The most addictive part of these loans is their immediate approval. It does not take more than 24 hours from applying to getting the loan credited in the borrower's account. In some cases, it hardly takes even 12 hours. Instead of waiting for several weeks, your loan application is immediately approved.
No relevance of credit score- Banks check the credit score of their loan applicants. Based upon this score, banks then decide to whether approve or disapprove the loan amount. In the case of instant loans, credit score is not a decisive factor to be determined by the lending authority. In fact, most of the applicants applying for short term loans have a very bad credit history.
Drawbacks:
Very expensive loans- As compared to a typical interest rate of less than 15%, payday loans have interest rates starting at 30% or higher, which makes these loans very expensive to repay. Payday lenders usually provide a ballpark estimate of the principal amount plus the interest expense to be paid within 30 days deadline. If you fail to repay within the time limit, interest expense keeps on increasing.
More debt- In simple terms, the inability to repay a payday loan increases your debt level and there comes a time when the repaid amount is often 10 times greater than the borrowed amount. Instead of getting out, you are further getting buried under heavy pressure of debt.
Very addictive in nature- The quick application approval process of these loans make them addictive in nature. Unfortunately, this has become a habit for many borrowers who are just unable to pay the rising debt on time. Do not indulge in this habit.
Concluding, it is better in cutting down your unnecessary expenses rather than borrowing funds to finance your luxuries. Loans are never a good option for anyone. Make use of these loans very wisely or you could end up in a big financial stress.
You are right! As compared to other loans, payday loan is one of the most easiest loans without fail. The most surprising thing is that such loans approve in minutes without any hurdles. Thanks for such beneficial info.
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