Thanks to high speed internet and fast online services, getting a loan is easier than 20 years earlier. As with any service, payday loans are associated with their own set of plus and minus points. The trick lies in being able to discern exactly when such a loan would be useful.
Before explaining when a payday loan would be useful to you, it is important to understand when you should NOT apply for one. Here are some situations where such instant loans may not be the best option:
- You have already taken out a loan that you are repaying. Avoid applying for another loan to pay the first one; This is usually the beginning of a vicious cycle of debt
- You require a loan for impulse consumption or spending on luxury goods or non-essential items; If you want to buy the expensive perfume, hold on until you have enough money to do it. The same goes for vacations, gifts and clothing purchases
- Your income is low. Remember, fast loans are usually expensive. Interest rates are exorbitant. If you earn a low income, these may not be for you. Instead, ask for help from your bank or financial advisor
There are certain benefits of payday loans:
- They are fast, easy and hassle-free to obtain: If a loved one is in the hospital and you need a plane ticket quickly, payday loans are a good option. The approval is often within an hour and you can get cash almost immediately
- They are an excellent option if you need urgent money on a weekend or public holiday. As the Internet operates 24×7, payday loans are always available including nights and over weekends
- If you have a bad credit history, there are certain lending companies that are happy to offer you credit. It’s important to keep in mind that loans given despite bad credit may (and often do) cost more. Interest rates could be higher. But the option is available in the event of a serious emergency
- The application process is simple. The forms usually ask for your name, contact, age (you must be over 18), employment information, earned wages, etc. You may need to scan your ID, bank account information and employment certificate
- You can apply for a payday loan from the comfort and privacy of your home. There is no need to run back and forth to banks and other lending institutions.
To avail of payday loans, you may want to remember the following precautions:
- Make sure you are aware of the state laws governing interest rates. Each US state has different laws when it comes to limiting high interest rates. If you find a lender asking for too much, you can report them to the consumer agencies
- Apply for an instant loan only if you are severely stressed for cash. Remember, payday loans do not come for free. Sit down and analyze if the situation really warrants an application for a payday loan
- Before applying, calculate and see if you can handle the repayment schedule. If you skip repayment deadlines, you may have to pay double or even triple the interest rate. The company then offers to transfer your loan, but it does not disappear. You could end up paying interest rates of 400% per year.
- Compare and check if your credit card company can help you with a loan instead of a lender
Payday loans only fit the bill if:
– The need is urgent and urgent
– You can repay the principal and interest payments without being squeezed into a corner
The trick is to pay off your loan and wipe it off your slate for good. Avoid rolling over the loan or delaying repayment.