There are many situations when you want to buy something but you are maybe 90% there financially and you need some extra money. Loans sound like a great idea here, and they can help save you when you are in a pinch and don’t have the money you need. With that in mind, Payday Loans are very common because they are simple, easy to access, and you can acquire small amounts of money as a loan. But as you can imagine, they also have their downsides.
What is a Payday Loan?
The main idea behind a Payday Loan is that you are asking a lender for money, anywhere from $100 to $1500 in general. Most of the time you will have a window of roughly 2 weeks to a month (your next payday) in order to repay the loan. A payday loan can potentially damage your credit if you don’t pay the loan back on time, although credit reporting is rare. Payday Loans are also known as bad credit loans, short-term loans, or cash advances, among other names.
What are the benefits of Payday Loans?
Maybe the best thing about Payday Loans is that you can access them with ease. Many lenders offer this service and you can get anywhere from $100 to $1000, and even more. There are even lenders that will provide fast online applications 24/7 which can have the money in your bank checking account within a day or two.
Moreover, you don’t have a lot of requirements when compared to other loans. Usually, you need to have a social security number, some form of legal photo ID, be over 18, have a job, a few personal references, and an active bank checking account. And that’s pretty much all you’ll need. The reason they call them bad credit loans is that they don’t really check your credit. It’s also an unsecured loan, so you don’t need to offer any item as collateral, like in the case of some other types of loans.
Are there any downsides to Payday Loans?
Yes, they usually have a very high-interest rate. They can go up to 400%, which is obviously quite a lot. On top of that, these loans won’t help you build credit. You can work with a credit repair company, or DIY credit repair. Also, they don’t dig very deeply into whether you have the ability to truly pay back the loan or not. You can easily find yourself trapped in the “Payday Loan Shuffle” if you’re not careful.
One thing is certain, Payday Loans are very helpful if you need money fast. With that in mind, you should ensure that you have the income needed to cover such debt and any interest related to it. Since 1 in 4 Payday Loans are borrowed more than 9 times, it’s important to take Payday Loans only when you really need them. They can be helpful, but you must use them responsibly!