We all are non-immune to falling victim to financial deficits, especially when the month ends. Financial emergencies can knock on anyone’s door any day. Some needs are so urgent that you fail to arrange cash and seek monetary help from anywhere possible.
Most likely financial emergencies that occur are:
- A wrecked car battery that has to be replaced ASAP
- Exhausted indoor coils of your air conditioner in the mid of hot summer
- Requirement of a laptop to appear in an online exam
- Replacing hearing aid of senior citizen at home
The list can go endless, emergencies could be anything, and they can drain your savings in fractions of seconds.
Ideally, every individual should preserve an emergency fund unfailingly to meet such urgencies. But if you don’t have one, then there might be a valid reason behind it. Many opt for loans for people on benefits to meet their fund needs.
You might consider borrowing cash from your family and friends. It could be the best option available at the time of urgency as you get funds without any interest, but you cannot always rely on this alternative. Because they also need money, and you cannot burden them with such demands.
Payday loans come with numerous benefits in such hard times. Let us learn more about these loans to gain the needed understanding before applying for them.
Pros and cons of payday loans: Learn how it works
Payday loans are generally short-term loan that provides you with fund immediately to cover a financial emergency easily with nil documentation. You are required to pay the borrowed money on your next paycheck day.
These loans are provided at a high rate of interest wherein you are required to pay back the money within two weeks or the next payday.
Payday loans do offer some benefits but can cost you more than you imagine if you fail to be cautious with their repayment. Therefore before opting for it, learn what you need to do prior to applying for it and what is expected after its approval.
Let’s start with its advantages:
- Ease of access
Payday loans are very easy to access. You can conveniently apply for it, and within a day, the desired amount gets credited to your bank account. You can easily cover your unexpected expenses like a broken car, medical emergencies, home repairs, etc, with it.
- Quick acceptance
As compared to other mortgages, payday loans have simple eligibility and acceptance criteria. If you opt for payday cash loans from a direct lender, then even with a lesser income, you get instant approval.
- Approval with poor credit
Payday loan lenders have less to no interest in gauging your credit score or financial history. They quickly approve your loan application even with a bad credit score.
- Unsecured mortgage
You are not required to put any asset as collateral security to obtain payday loans. Many reputed financial institutions expect to stake your valuable asset before availing of a loan.
- Free to change the mind
Payday loans offer the advantage of 14 day cooling period, which means you can easily cancel the loan agreement within 2 weeks if you happen to change your mind after taking it.
You have gained a thorough knowledge of the benefits that come with a payday loan. Now learn about its disadvantages.
- Expensive affair
Payday loans are very expensive. Several lenders charge a very high rate of interest on the borrowed money. Many borrowers struggle with its repayment as the cost is too high.
- Considered rapacious
Many people consider payday loans as rapacious as they target individuals who earn lesser income and have bad credit. Many lenders still exercise crooked ways to collect their money when a borrower fails to repay the money.
- Traps you in debt
If you fail to make repayment on your paycheck day, you might enter a debt loop. Since you already know that payday loans are offered at high-interest rates. You might take another debt to make up with its payment. It puts a borrower into a debt ploy.
- Questionable practice
Many cases happened in the past when direct payday lenders became very notorious for the tough collection practices of the money. Some followed questionable practices by sending intimidating writings to borrowers.
- High-interest rates
Payday lenders often follow shrewd marketing tactics. Instead of disclosing the annual rate of interest, they will tell you the interest rate on a daily basis.
To conclude
Payday loans for people on benefits are often the most preferred method of arranging quick cash. It comes with lots of benefits. It is designed to help individuals who are in urgent need of funds with zero documentation. Once you take payday loans, you are required to pay them off with interest whenever you receive your next payment.
It doesn’t need any collateral security; that is why they are also known as unsecured loans. You are required to pay the mortgage money in a lump sum, including the interest. If you default on its repayment, then your credit score will see a steep fall.
It may have some upsides, but these loans are not appropriate for every individual as it is considered predatory. It may provide you with the ease of access to funds even with a poor credit score, but these are offered at a very high rate of interest. Analyze all the pros and cons mentioned above and see if your financial situation can handle its repayment, which is on your next paycheck day.
