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This content is for informational purposes only and is not intended to provide financial advice.
Most of us have been in a situation where an unexpected bill pops up and we are left with no funds to pay it. It’s those moments that make us realize what a valuable service the payday advance industry provides.
From the impression of a speedy fix for cash problems to being considered a bad debt option, advance payday loans have received a lot of press in recent times. However, are these loans really as risky as reported? Here are the positives and negatives of advance payday loans to help you determine if this is a suitable option for you.
What are Instant Cash Payday Loans?
Even though there are different types of instant loans, they have a lot in common. All come with high-interest rates, and you’re typically required to repay the loan within a few weeks or days (depending on which type of loan it is). If your repayment is missed, the lender can take ownership of the collateral.
In case you may need an instant 100 dollar loan or any amount up to $1,000, Online Payday Loans are the most suitable option. They do not require collateral and offer you cash on the day you apply for the loan.
Why are Advance Payday Loans so Popular?
If we check Google Trends for the popularity of “Advance Payday Loans” search query, we’ll see that it’s always about 60 – 80 grades. Though there’re times of fall and rise, the term has never lost its popularity.
One of the most trustful Resource says, though considered risky, Payday Loans can boast of so many advantages that they seem to outweigh all the drawbacks. Let’s enumerate at least some of them:
- Easy to apply and qualify: The only thing payday lenders care about is that you have a job, and they don’t necessarily look at your credit score. They also make it easy to apply by using only an online application.
- Information security: Your personal information is safe because payday lenders are not allowed to give it to other organizations.
- Fast: Once you’ve filled out the application, received approval, and waited for some of your money to come through, you should be getting your cash in less than two minutes.
- Flexible: You can easily repay your payday loan when you get your next paycheck and it won’t take a lot from it.
- Amount: You get a predefined amount of money and then pay back what you borrow in installments. This prevents the sequence of debts where you end up owing a lot more than what you originally borrowed.
- Legislation: In many states, there are laws that protect you from paying back loans at interest rates much higher than what is approved by state law.
- Use the money for anything: Payday loans generally don’t restrict how you spend the money, but if you want to make sure of cash advances, check with your lender before taking out a loan.
What are the Downsides of Advance Payday Loans?
- A disadvantage of payday loans is that they are expensive. Depending on the state, payday loans have high-interest rates that range from about 400% to 36%. For comparison, many personal loans charge between 4% and 36% interest, while credit card interest can range from 12% to 30%.
- Payday loans are considered predatory because of their high costs that could lead to a debt cycle. Some warning signs of predatory loans are guaranteed no credit check approval and continuous rollovers leading to more debt.
- These lenders primarily target low-income, minority communities.
- To get one, borrowers often have to give them access to their bank account. Nowadays, setting up automatic payments is pretty standard, but it works a little differently with payday lenders.
- They can sue you for the money you owe and don’t help you build credit. The last problem with payday loans is that they don’t generally report to the credit bureaus, so you don’t get any financial benefits from them.
Instant Payday Loan Alternatives
No matter which option for instant cash you choose, you’d better prepare and pre-qualify to make sure you are eligible for this financing type. It’s highly recommended to Check Credit Score Without Hurting It. It’s free and won’t take long. When you know your score, you can be aware which loan type to rely on. Here are the options available:
- Consider an Alternative Loan. Certain credit unions offer alternative loans called payday loans.
- You may be able to qualify for a “bad credit” personal loan that ranges from $1,000 to $35,000.
- Borrow From Friends or Family. If you’re short on cash and don’t want to take out any extra loans, consider asking your family or friends if they’ll lend you some money.
- Balance Your Budget. Instead of going into more debt and taking out more loans, try balancing your budget and see where all your money is going.
- If you can’t figure it out, then consider talking to a credit counselor.
- Start a Side Hustle. If you have extra time on your hands, you might be able to make some money with a side hustle.
- Consider a Low-Interest Credit Card. If you have good credit, then you may want to consider getting a low-interest credit card and paying off your balance in full every month.
- Apply for Peer-to-Peer Loans.
Conclusion
Payday loans were designed to help borrowers cope with short-term costs until they next got paid, but these days this term describes a much wider class of loans. Payday loans have their upsides, but they can come at a very high cost too. There are lots of other options available to US borrowers, though, so the disadvantages of payday loans don’t need to stop you from applying for instant emergency financing.
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