Payday loans are a type of credit facility where borrowers obtain short-term loans even though at high interest rates. This kind of loan is based on the income of the borrower. Payday loans can be obtained at any time of the month. Since they do not require any form of collateral, payday loans are common with people who have short-term financial constraints and would wish to borrow money to solve these problems. You can visit the Observer.com website to learn more.
This article shall discuss the pros and cons of getting a payday loan for your financial needs. There are many types of payday loan lenders that you can obtain credit from. However, you should always know the terms and the conditions under which such loans are offered.
Types of Payday Loans
1. One Hour Payday Loan
These are online payday loans that one can obtain in a very short time. All one needs to do to receive these kinds of loans is fill out a form online. The information you submit should be truthful. This kind of payday loan is processed quickly and can help you sort out any emergencies you may have.
2. Instant Online Payday Loan
These are short-term kinds of loans. They are intended to help you solve any financial emergencies that you may have. They do not have lengthy processes, and one can have their money in their accounts in a matter of minutes. These online loans have high-interest rates, and therefore one needs to be aware of this before they sign up for the credit facility.
3. Cash Advance
A cash advance can be a good way to borrow for short-term needs for those short on money. The repayment for this kind of loan is taken directly from your bank account. Therefore, you need to be sure that your bank account has sufficient funds to cover this need. Always read and understand the terms and the conditions of these payday loans, so you don’t get into problems with the lenders.
The Advantages of Payday Loans
- These loans are fast processing. As such, one can easily sort out any financial problems they may have before their next payday. Most people live on their salaries means that they may have financial constraints before their next payday. As such, an online payday loan can come as a relief to such people.
- It is easy for one to qualify for these loans. Traditional loans offered by the bigger lenders normally come with lots of stringent requirements. This is not the case with payday loans. Most people will qualify for payday loans as long as they can repay the same at the next payday.
- You set your limits when it comes to these kinds of credit facilities. The bigger the monthly income, the more money you can qualify for as a payday loan.
- You can use the money lent to you for anything you want to spend on. Unlike most traditional lenders, online payday lenders do not limit you on how to use your money.
The Disadvantages of Online Payday Loans
- Online payday loans are expensive to obtain and service. The interest rates charged for online payday loans can be exorbitant. These interest rates can go up to 400%, which may weigh down your financial stability.
- With an online payday loan, it is easy for one to get trapped in the endless debt cycle. Remember that extensions of loans attract rollover fees, which could mean that you can easily be in debt. As a result, you will suffer additional fees on top of the associated stress and mental anguish that comes with loan repayments.
- The fact that most online payday lenders are located in minority communities means that these forms of credit are targeted at lower-income people. This means that these people may be entangled in a negative financial status for a long time. This can only contribute to an increase in poverty levels.
- The payday lenders have full access to your bank account details. This is not always a good thing. Some lenders will recover what you owe them directly from your account. Others may have you write them a postdated check. This means that if your account does not have enough money for this recovery, then you will suffer overdraft or failed payment fees.
Regardless of the above advantages and disadvantages of payday loans, it is important that you read the terms and the conditions of such loans before signing the contract.
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