Getting a payday loan isn’t an easy decision, but there are times in life when you might need extra funds to get to the next paycheck. Payday loans are given in smaller amounts, ranging from a couple hundred dollars to a couple thousand. They’re short term loans, and the repayment is typically for the next payday, or shortly after. Payday loans are also called ‘paycheck’ or ‘cash’ advances, short term, or fast loans. This blog will tell you that Are payday loans bad: Weighing the Pros and Cons.
The biggest question behind these short term loans is, ‘are payday loans bad?’
Are payday loans bad?
Payday loans have definite advantages, along with some disadvantages you should consider before getting one. They can get you the cash you need, but is it bad to take out a payday loan?
Consider these things:
Accessibility
A main selling point of payday loans is how accessible they are. You don’t have to have much credit, or even a great credit score to get one. The most important thing is a steady income, and a way to prove it. Because of this, many people that can’t take out loans through traditional lenders choose payday loans when they have urgent expenses.
Likewise, if you’re worried about a credit check interfering with the credit you’re working on building, these loans often don’t need a credit check.
Total cost
They may be easier to get, but they also charge for the ease of access. For example, most credit card interest, or personal loan interest tops out at 30-36% (depending on credit history, collateral, etc). Some even have interest as low as 4%. Payday loans are profitable because of the interest they charge, which can average out at 400%.
In certain cases, paying that extra interest is worth getting the emergency funds you need. If you don’t understand the terms or how interest accrues, you can end up owing a lot of money. If you make repayments on time, and know how much interest you’ll owe, it can be a manageable trade off.
Quick funding
They offer funds when you need them most. It’s just important that you use them when it’s appropriate. Wanting a new TV isn’t the same as needing to pay a medical bill or keep the lights on. Most funds from payday loans are deposited directly into your bank account, often within a day or two after approval.
Some lenders even offer same day payday advances. If you have an emergency, you can fund it quickly. Keep in mind you’ll still pay interest with your repayment, so if it’s a ‘want’ and not a ‘need’ a payday loan may not be the right course.
Final Verdict
After looking at the most important aspects of it, are they bad? Any financial decision you don’t make for the right reasons, or without understanding it, is a bad one.
When you understand it, you can make the choice you need for your situation. Payday loans can get you through hard times and emergencies. They aren’t bad, but as a responsible lender, you need to make a well informed, responsible choice before you borrow. In case you would be interested you can find more info here.
