Payday loans have gotten the bad rap for a long time. With its incredibly high-interest rates and the danger of debt trap, the financial product has been constantly criticised. But no matter what financial experts may say, there’s no denying the fact that payday loans offer what many borrowers with bad credit often need—quick cash.
If you’re one of the many people who have thought of applying for a payday loan to fix financial emergencies then knowing the pros and cons is crucial to your decision. Like with most things in life, as long as the pros outweigh the cons, then you’re likely making the right decision.
What are the advantages of a payday loan?
Payday loans may be highly controversial but not without some pros. Here are some of the advantages you can enjoy with a payday loan:
- Online availability – Payday loans are widely available online, which means there’s no need to go to your lender’s office to avail the cash that you desperately need for a bill or any other expense.
- Minimal requirements – Since payday loans are not secured on any asset or collateral, the requirements are typically very minimal for borrowers. All you need is to meet the basic requirements, which includes being of legal age and a UK resident with a full-time job.
- Fast cash – The promise of quick cash is one of the chief reasons why borrowers are drawn to payday loans. If you need the cash today, getting a payday loan can easily meet your need. Most, if not all, lenders promise approval in 24 hours or less.
- No credit checks – There’s also no credit checks for borrowers to worry about. If you have a bad credit score and you’ve been struggling to avail a personal loan elsewhere, getting a payday loan instead may just be the sensible thing to do in a financial emergency.
What are the disadvantages of a payday loan?
Though quick to avail and perfect for borrowers with bad credit, payday loans also have its downsides. These downsides should be thoroughly considered before you sign up for a deal. Here are the cons associated with a payday loan:
- High interest – Payday loans are extremely expensive. The interest rates are often steep especially since the loan product is specific for borrowers with issues on their credit score.
- Late payment fees – In addition to the high-interest rates, there are late payment fees to think about. In the event that your payment is late, expect hefty additional charges added on top of your currently steep loan cost.
- Debt trap – But worse of all, there’s the danger of debt trap. Because payday loans are easy and convenient, people who are always in need of quick cash may tend to continue the borrowing month after month. Before you know it, you’re already deep in debt with hefty interest rates that are hard to get out of.
Is a payday loan for you?
By knowing the pros and cons of a payday loan, it would be easier to decide whether it’s the right loan product for you or not. If you feel that it’s a sensible choice to meet your financial emergency, there’s only one thing to keep in mind – Make sure you repay the loan on time to avoid the extra charge. And once the loan is paid up, don’t renew the loan. While payday loans promise quick cash, it’s not the type of loan product you want to be dependent on for financial emergencies.