Are Payday Loans Bad? Weigh up the pros and cons

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Getting a payday loan is not an easy decision, but there are times in life when you may need extra cash to get to the next paycheck. Payday loans are made in smaller amounts that range from a few hundred dollars to a few thousand dollars. These are short-term loans and repayment is usually made the next payday or shortly thereafter. Payday loans are also known as “paychecks” or “cash advances”, short term or quick loans. This blog teaches you that payday loans are bad: weighing the pros and cons.

The biggest question behind these short term loans is “Are Payday Loans Bad?”

Are Payday Loans Bad?

Payday loans have distinct advantages, along with some disadvantages that you should consider before getting one. They can get you the money you need, but is it bad taking out a payday loan?

Consider these things:

Accessibility

A main selling point of payday loans is how accessible they are. You don’t have to have a lot of credit or even good credit to get one. The most important thing is a stable income and a way to prove it. For this reason, many people unable to obtain credit through traditional lenders choose payday loans when they have urgent issues.

Likewise, if you are concerned that a credit check will affect the credit score you are working on, often these loans don’t require a credit check.

total cost

They may be easier to obtain, but they also cost easy access. For example, most credit card or personal loan rates are 30-36% (depending on Credit history, Collateral, etc.). Some even have interest rates as low as 4%. Payday loans are profitable because of the interest they charge, which can average 400%.

In certain cases, it is worth paying this additional interest to get the emergency funds you need. If you don’t understand the terms or how interest is paid, you can end up owing a lot of money. If you make the repayments on time and know how much interest you owe, this can be a manageable compromise.

Fast financing

They offer funds when you need them most. It is only important that you use it when it is appropriate. Wanting a new TV is not the same as paying a doctor’s bill or leaving the lights on. Most payday loan funds are deposited directly into your bank account, often within a day or two of approval.

Some lenders even offer same day payday advances. If you have an emergency, you can fund it quickly. Remember, you are still paying interest on your repayment. So if it’s a “want” rather than a “need”, a payday loan may not be the way to go.

Final verdict

If you’ve looked at the most important aspects, are they bad? Any financial decision that you don’t make for the right reasons or without understanding is a bad one.

Once you understand it, then you can make the choices that are appropriate for your situation. Payday loans can get you through tough times and emergencies. They are not bad, but as a responsible lender you must make a well-informed and responsible decision before taking out any loans. If you are interested, you are welcome to you can find more information here.

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