Those who are in urgent need of money can borrow a short amount of loan for a short period. It adds a great advantage to the borrower if he/she can pay it on time. One can get the money at the shortest time with much fewer hurdles.
While it is easy to borrow the loans with a bad credit score, it has a higher interest rate so it is hard to say if the borrower has advantage or disadvantage. There are many other names which could be used for a payday loan like cash advance, short-term loan, fast load and bad credit loan.
Pros of Payday loans
Easy to Access
The most important advantage of payday loans is that it is easy to get. One can get the loan without any credit score check and other formalities which one needs to go through while looking for another kind of loan. Many money lenders credit the loans within 24 hours and available 24*7.
No Need for Good Credit Score
The best thing is that if you don’t have an excellent or good credit score then you don’t need to show it as these details are not considered while applying for the payday loans so it will not affect your credit score in any way. You are eligible for the payday loans and your credit history will not be verified at any stage of loan approval.
One does not need to go anywhere while applying for the fast loan, you can apply online and complete all the formalities there. Loan lenders even give you an option whether you want to collect the check from the store or directly want to transfer the cash into your account.
No Need to Provide any Collateral Security
Unlike in other loans you need to give collateral security to the banks but in a payday loan, you don’t need to offer any security and hence there is no risk of losing anything like your car, house or any other valuable asset. However, the rate of interest is high and the risk of losing anything is low.
Cons of Payday Loans
The loan has an Expensive Rate of Interest
As compared to the other loans like a car, housing and personal loans, payday loans have a higher rate of interest. If one is not able to pay at a time then it can jump almost at double and the interest rate could be considered equal to or more than that of credit cards.
Low transparency and consumer protection
The chances are high of facing a loan fraud because there are still not enough laws for consumer protection. Due to lack of the laws, the lenders can add their terms and conditions as well as the unregulated rate of interest.
Payday loans could be considered predatory
The payday loan could consider a predatory loan because it has unfair and misleading terms that can trap the customer in the debt cycle. Moreover, it has a higher interest rate which increases rapidly and is hard to pay.
They have access to your bank account
To obtain a loan amount, borrowers need to grant the lenders access their bank account. Most of the lenders will ask you to write a postdated check which means they will cash that check after your payday and if you don’t have enough balance in your account then you can face heavy overdraft fees, check bounce fees from your bank as well as from the lender if you failed to payback.
However, it is easy to get a small amount of loan via payday loans, the interest rates are extremely high and often targets the lower-income group who don’t have a good credit score or those who are in urgent need of money.