Many people out there hold strong opinions regarding payday loans. Some have heard about them through their friends, and others have learnt about on the internet. Some believe that it is a trap, and others think that it is the way out of a pressing financial crisis.
With so many contradictions, it is difficult to make a decision regarding them. Here we have mentioned some positives and negatives of the payday loans. You can decide for yourself whether choosing them is a good decision or not.
1. Easier to Get
There are loans out there that take at least a week to obtain. But when we talk about payday loans, they are pretty easy to get your hands on. They are not a lot of requirements to be eligible for the loan, and you can easily obtain them in 24 hours. There are no application forms or credit checks as such. If you have not made the payments in the past nor have a good credit score, you can still get the loan. What’s more, your bank account will be filled with the requested amount of cash by the next day. At times, some payday loans can be received in a few hours only.
2. You Decide the Loan Amount
Most of the loans come with a set amount, and people have to take that amount if they want the loan. However, this is not the case with payday loans. They are flexible, which means you can borrow the minimum of £100. You do not have to qualify for a £1,000 payday loan. Therefore, you will be borrowing the amount that you can afford to return back by the next payday.
3. Time Limit
One of the downsides of payday loan is the short time limit to return the loan back. The person needs to give back the money by their next payday. If they cannot do it, the interest on their loan will keep increasing. Therefore, it will be a problem for people who borrowed money but cannot afford to return it. If you borrow the money by keeping your returning power into consideration, you will not face any issue as such.
4. Rate of Interest
The interest rate on payday loan varies from lender to lender. Some payday loans come with excess of 300% on annual interest rates. This huge amount of interest rate can really empty your pockets. You may be able to get some quick cash through payday loans. However, in the end, these loans will hinder you from saving money, as most of your income will be going in paying the interest rate.
5. Effect on Credit Score
Although payday loan providers do not care about your credit score before granting you the loan, but payday loan itself can have a harmful impact on your credit score. This negative impact can be even worse than those of auto loans and credit cards. Initially the drop in the score will not be significant, but with time, it can lead to a major fall.
Payday loans are not as bad as people like to believe. If you borrow the right amount of money, make the payments on time, and have a returning capacity, then payday loans can be quite useful in getting you emergency money.