Payday loans are a form of short-term credit that has become extremely popular in recent years.
Payday loans can be very helpful for people who need quick cash to cover an emergency expense, but they also come with many risks and pitfalls that borrowers should know about before taking one out.
Let’s explore payday loans and their many risks in greater detail so you can make an informed decision about whether or not you should take one out.
What are payday loans?
A payday loan is a type of payday advance that borrowers are able to get for a specific amount and an allotted time period.
The benefits of payday loans include providing access to money when credit cards or other loans are not an option as well as providing funds for emergencies. One major downside is that payday loans typically have high interest rates and borrowers can end up stuck in debt if they are unable to repay the loan.
Consumers should only take out payday loans as a last resort because they can be harmful and expensive. If you choose to take out a payday loan, you should research payday loans to find the best payday loan option for your needs.
How payday loans work
Online payday loans work similar to payday loans. However, instead of going into a store and borrowing money from the payday loan provider, you submit an application online.
You then have to accept terms and conditions on the payday loan, which you will have to repay in a defined time frame that ranges anywhere from one week to 1 month.
You will then receive the payday loan funds via direct deposit.
The pros and cons of payday loans
- Payday loans are usually very quick to get, meaning that you can receive the money the same day.
- Payday loans are easy to apply for and there is little paperwork involved.
- Payday loans are short-term, meaning that you will not be saddled with debt for long.
- Borrowers who need payday loans can always find payday lenders that they can work with.
- The payday loan fees can be exorbitant compared to other types of loans.
- After payday has passed, payday lenders will attempt to collect all of the money owed from you without any loopholes in payment plans.
- For payday loans to work, you need income which means that they are not for everyone. This type of loan is best used as a last-ditch effort by those who have no other choice when it comes to receiving money quickly and temporarily.
- High interest rates. The average payday loan interest rates are 400% or a combined 36% interest rate on an annual basis.
Who can get a payday loan
You should meet the following criteria:
- You are at least 18 years old.
- You have a full-time job or receive regular payments from the Social Security Administration or another government agency.
- You have a checking account.
Where to apply for a payday loan
If you are ready to apply for a payday loan, there are a few places that you can do so:
- You can apply online through the payday lender’s website.
- You can also visit a payday lender location in person and complete your loan application processes on site.
- Finally, payday lenders do offer payday loans by phone as well.
When you should NOT take out a payday loan
A payday loan can be an easy way to get cash quickly, but it is not always a good idea. Before taking out a payday loan, consider these conditions:
- If you cannot repay the payday loan in full at the next payday
- If you don’t have a steady income or employment
- If you take payday loans often
- If your credit score is bad
- If you are considering bankruptcy proceedings and payday loans are a concern.
Payday loans can be a great way to get cash fast, but they are not always the best option.
If you take payday loans often or if your credit score is bad, payday loans may not help your financial situation in the long run.
Before taking out one for yourself and considering all of this information, it’s important that you know where payday loan lenders are located so that you don’t have to travel far away from home to find one.
Or, you can easily apply for payday loans online.