Payday loans and cash advances have been around for some time now and if you are reading this, you yourself may be considering one. As a borrower, you need to know the good things and the bad things about these loans before you commit to taking one out. Take a minute and look at some of the basic goods and bad about this type of loan.
First, lets look at the good part of these loans.
- They Allow People With Bad Credit To Borrow
If you have bad credit, you will often find yourself shut out of the lending world. What happens if you need money in an emergency? The only source of money in these situations for people with poor credit is the payday loan. They fill a void that other lenders do not attempt to fill.
- They Fund Quickly
What other loan type funds on the next business day? There are very few that can do this. Traditional lending takes time and paperwork. Time is something that you do not have in an emergency.
- They Are Easy To Qualify For
All you need is a few things to qualify for one of these loans. You need a checking account, a job and a social security number. That is it.
Now lets take a look at the potentially bad things about payday loans.
- The Fees Are Very High
With effective APR’s often over 400%, these are some very costly loans. Loan fees are based on a set fee per $100 borrowed. That might be anywhere from $20 to $30 per $100 borrowed. Combine that with the very short loan terms and you get high APR’s.
- They Are Advertised Low Income Borrowers
It may not be intentional, but that is really who these loans are for. If you had a high level of income, you probably would not be taking out a payday loan. The average doctor will not be taking out a loan like this, these are blue collar loans.
- There Are Many Bad Lenders
The industry is full of many lenders who just want to squeeze as much as they can out of you. Be careful of those who make it to easy to refinance that loan again and a gain. A good lender will offer you some credit counseling.
As you can see, there are many pluses and minuses to payday loans. A borrower should consider all of the goods and bad before they commit to a loan of this type. Thanks for reading.