Payday loans are small amount loans which are obtained with the pledge to return the principal as well we the levied interest by the borrowers’ next paycheck. Such types of loans are also called as cash advances; however, there is a difference between the two. Cash advances are generally taken through a credit card or a personal checking/savings account. Payday loans are different as you need to have to credit card or any savings account attached to your employer. You can approach a payday loan company and ask for the loan.
Benefits of payday loans
- Quick to grant: Payday loans are quick to avail. You need not wait for long to get the money in your pockets. Usually the loan application is approved within day. So, it’s very helpful in the time of your emergency.
- No credit check: The best part of payday loan is that your credit score is not evaluated to grant you loan. The issuers will just see that you have a job and a savings account. So no major paper work is involved with such loans.
- Easy process: Another good thing about such loans is that you can apply for the loan online and you need not go to a bank or financial institution. Just land at a legitimate payday loan company and apply for the loan online. You get your money in your savings account within 24 hours.
- Helps in credit rating: Though your credit score is not checked when you apply for this loan, but payday loan can help you repair your bad credit if you pay off the full amount by your next pay check day. If you do it on a regular basis, your credit score also improves.
Drawbacks of payday loans.
- Highly risky: Payday loans are not without financial risks. If you are unable to pay off the loan amount, your credit score will be adversely affected. Moreover, you may not be able to get any type of loan in the future.
- High interest: The interest rates on payday loans are too high to afford. It’s generally 25% of the loan borrowed. So, if you take $100 you would end up paying back $125 at the end of the month.
- Small loan: If you are in need of a big loan, payday loan is not for you. You won’t be granted a loan under payday. At the maximum you can get $1000 payday loan. So, this is not good for a big investment.
So, think twice before you take a payday loan. When you are in dire need of money, apply for this loan, else, you better go for secured loan which will have long term to pay off.