Payday loans can be an invaluable source of money when you don’t have other options. However, payday loans can have some disadvantages relative to the alternatives. This is why you should know exactly what you’re getting into when contracting one and make sure that it is the right choice for your situation. Let’s take a closer look at some of the pros and cons of payday loans. We’ll also share a few tips you should follow if you do decide to seek a loan.
The Pros of Payday Loans:
Payday loans are unsecured loans. You won’t risk losing property if you don’t pay it on time. This is in sharp contrast to title loans, where you could lose your car or even your house if you don’t make the payments. This means payday loans are available if you don’t have property to offer as collateral.
Payday loans don’t have as much paperwork as other types of loans. You also don’t have to have your credit checked. This makes payday loans an option for those with a job but poor credit.
The loan terms are fairly flexible, though they have a deadline for when the loan needs to be repaid. If you can’t pay the loan in its entirety when it is due, you are often given the option to roll over the balance into another loan or set up an instalment plan.
The Cons of Payday Loans:
Payday loans are intended to be repaid within a month, typically when you’re next paid, hence the name. The interest rate you’re charged on the loan rivals those charged on credit cards. This means you’ll pay a high interest rate if you have to roll over the loan because you can’t pay it off.
Some payday lenders require you to give them access to your bank account via a Continuous Payment Authority. This means you could get in trouble if you don’t properly manage your money. Make sure there is enough money in the account to repay the loan when they draft the account.
Observations About Payday Loans:
Payday loans can take place in a financial service provider’s office or online. This leaves open the possibility that you’re entering your information into a website only promising fast cash. The solution is to find a reputable Payday Loans direct lender that is FCA-regulated. Then you know that your personal and financial information is safe.
Payday loan amounts are limited by law, and they may be further limited by how much you earn. If you have a modest part-time job, don’t expect them to loan you a thousand pounds.
Payday lenders don’t need to check your credit in the way a credit card company would. However, failure to pay the payday loan will get reported to credit bureaus. In this regard, payday loans don’t hurt your credit unless you fail to repay it on time.
Payday lenders are an option to those who have few other ways of raising money quickly. Understand the pros and cons of this financial product so that you make the right choice.