Is the money in your pocket not enough to pay for an essential purchase or an emergency expense? Is it impossible to wait for your next paycheck – which is due in the next five days – for this important and immediate purchase? Have you already used up the credit limit of your credit card?
Indeed, this is a tough situation to be in, but you have plenty of options to borrow the sum of cash you need. Right now, you can find online payday loans for your financial situation. It’s a small loan that’s perfect for people who need money for the short term.
Borrowers prefer payday loans because it has a straightforward application process, and the funds can be obtained immediately. But, like any other loans, you’re better off if you understand how this works before you apply for it. It’s also crucial to know the pros and cons of this loan option. For a little help, read on below.
What is a Payday Loan and How Does it Work?
Payday loans have enjoyed an equal amount of popularity and notoriety in recent years. For those who have just got a whiff of this loan option, the most common question is, “What is it, and how does it work?”
As mentioned earlier, payday loans are intended for borrowers who need a small sum of cash for the short term. Typically, this loan offers a loan amount of under $1,000, with a repayment period of two to four weeks. You can also discuss with the lender to lengthen the loan term for up to three months.
Payday loans got its name because lenders require borrowers to put their paycheck as security against the money they’ll borrow. Commonly, a borrower needs to provide a postdated check to the payday loan provider, and the latter can cash it out on the borrower’s next payday.
Pros of Payday Loans
There are advantages that you can enjoy if you choose a 24/7 payday loan. Read this list to learn more.
No Hard Inquiry on Your Credit History
For borrowers with not-so-good credit histories, an online payday loan is among the best bad credit loans that you can obtain. Providers of this type of loan don’t conduct a hard inquiry on your credit profile. For more tips on borrowing with bad credit at Crediteck, visit their site so you could learn more.
You can get loan approval so long as you’re employed and have a regular source of income. Just make sure that you bring requirements, such as recent payslips or bank statements, when you apply for this loan.
Simple and Easy Application Process
The best feature of a 24/7 payday loan is its fast and trouble-free application procedure. If you apply for it, there’s no need for you to go to a lender’s office and meet up with a bank manager. What you need is a stable internet connection for you to send your application and credentials on the lender’s website.
It’s not only convenient for you, but also for the lender to evaluate your qualifications and make a decision to okay your loan or not. Plus, as its name suggests, this loan option is available 24/7.
Fast Access to Funds
Since this loan doesn’t give you any trouble with its application process, it’s to be expected that you can receive the funds you need after the approval. Your lender will transfer the money to your bank account on the day of the loan approval or the day after it.
Payday loans are popular because of this quick access to funds. For borrowers who have unexpected or emergency expenses, this loan really suits their needs.
Cons of Payday Loans
Probably, you’re filled with excitement now to secure a payday loan after knowing its benefits. Don’t be too rash, though, because there are also drawbacks with this loan type.
Short Loan Term
Some may consider a short loan term advantageous, but for other people, it’s a huge drawback. Budgeting your repayment within this short time span can be challenging on your part, especially if your salary hardly covers the loan repayment and your daily expenses at the same time.
The worst thing about a short loan term is missing a payment. Once you fail to pay what you owe on schedule, you can go for a rollover option or extension. Of course, there are penalties if you choose to roll over the loan. It’s one of the reasons why borrowers get saddled with bad debt.
High Fees and Interest Rates
Most lenders charge 200% to 400% annual percentage rates for payday loans. It’s a significant disadvantage to borrowers with low income because they may struggle to pay for their debts. If you can find a better deal other than a payday loan, you should go for that one to avoid the exorbitant interest rates and fees.
You should be extra careful against bogus lenders and scammers that rip off borrowers of their hard-earned money. Despite government regulations on payday loans, there are still loan providers that don’t follow good lending practices. If you think that the lender doesn’t have a credit license or good reviews, it’s better to look for another lender.
Does This Loan Affect Your Credit Score?
Payday loans don’t raise your credit score even if you pay it off on schedule. The best explanation for this is that it’s only a short-term loan, and the loan amount is not that significant to boost your credit score. Moreover, payday loan providers don’t send reports to major credit bureaus concerning your payments.
However, your credit history will be in bad standing if you submit a bounced check as your loan payment. So, make sure that you avoid this unfortunate circumstance from happening.
If you need to secure a money loan for a short period of time, you can opt for a payday loan. This loan is also a good option if you have a bad credit score since payday loan lenders only conduct soft credit checks. However, you must be aware of the drawbacks of 24/7 e-transfer payday loans.