Do you need a bit of extra money ASAP? We’ve all been there, and there’s help. Click here to learn why payday loans might be the right choice for you.
Do you need money fast? Are you waiting on a paycheck that seems far too long away? If so, then a payday loan might just be exactly what you need to tide you over.
If you’re in a tight spot, then a payday loan can advance you the money you need to get yourself out of a financial hole. However, there are both advantages as well as disadvantages to this specific loan type. We’ll go over those in this article.
What Are Payday Loans?
A payday loan is a simple concept. A payday loan is a specific type of loan that gives you a small amount of capital, typically under $1,000. It is one of the several types of short term loans.
With a payday loan, you’ll typically give evidence of your income (through the form of past pay stubs), which serves as credibility that you will pay the loan back.
There are several advantages to taking out a payday loan.
First, if you don’t have a good credit score, many payday loans will offer you the capital you need without running a credit check. This means that this specific type of loan is accessible to a lot of folks rather than just to those with above-average credit scores.
Next, a payday loan takes very little time to process. You could have the money you’re looking for in just a matter of minutes! Compare this to any other type of loan, which typically takes a few days to process.
Lastly, a payday loan is intended to be paid off quickly once you get your paycheck. This means that you don’t have to string out payments for a long amount of time, making it harder for you to get out of debt.
All those advantages don’t come without some downside.
Firstly, the interest rate on a payday loan is significant. This stands to reason — if the company issuing the loan isn’t running a credit check, they’re taking a greater risk on you. Because they are assuming higher risk, it makes sense that they compensate for that risk with a higher interest rate.
Second, even though the quick payback intended with payday loans can be a blessing, it can also be a curse. If you don’t pay off the loan in one lump sum as intended, then the interest can compound. You’ll be looking at the equivalent of 100%+ APR!
Last but certainly not least, getting several payday loans can turn into a vicious cycle if you’re not careful. The interest rates can become a significant setback to your financial health if you don’t watch out. If you use payday loans only for emergency cash, however, you should be fine.
Should You Get a Pay Day Loan?
There you have it. Now that you know both the pros and the cons of payday loans, you should be much better equipped to answer the question of whether or not this type of loan is right for your financial situation.
For more financial advice, check out the rest of the website!