Ara Betty is a freelance financial writer and speaker about personal financing. She helps people realize their goals on becoming debt free with the use of debt consolidation. She hopes to expand her knowledge more about loans and debt to be able to write a book.
There are times when the next payday is far away and you find yourself quite broke. Emergencies may hit, leaving you financially stranded. It could be a mortgage payment you had to make, your kid’s school fees or an unexpected hospital bill. When you need cash right there and then, you may need an emergency loan. This means you have to look for fast borrowing alternatives. That is where payday loans come in. Payday loans are viewed in different ways all over. There are so many advantages of this personal financing plan. In this article, we explore the payday loans advantages.
Payday loans are short-term loans which a borrower is expected to pay it back once he gets his next paycheck. The payday amount can range from about $150 to about $1000. It all depends on what your needs are and how much you earn every month. Payday loans have been the alternative source of fast cash which people turn to in the middle of the month to solve emergency situations at hand.
Applying for emergency payday loans is just quite easy. First, you look for a reliable payday lender. You then establish the loan amount. The lender gets your credentials and verifies your information. After you sign the contract and get the loan, you are expected to repay by the next pay day. The requirement to pay up very soon is what makes a payday loan a short-term loan.
Payday loans are viewed in different ways all over. There are so many advantages of this personal financing plan. In this article, we explore the payday loans advantages.
Payday Loans Advantages
1. Fast and simple
Getting fast payday loans is easy. You need to look for a lender whose terms suit your financial needs. Finding the lender is easy as there are many payday lenders online. This gives you many choices.
The application process takes less than a week. Your preferred payday lender will request for and verify your credentials. The loan amount is dependent on your income. The payday loan’s fees and charges are calculated. An interest rate is established and the loan contract is signed. All these takes just under 2 days.
Everything has been made easy and convenient to get instant payday loans. Most payday loan lenders have websites which cater to your convenience. Hence, payday loans have become really convenient to borrow quickly for emergency situations.
The payday loan doesn’t require a lot of credentials. You just need documents for identification only. The lender will require your identification, proof of employment or a source of income. You may also need to include information such as your home address. What is important is the postdated check that you offer the lender. It contains the amount which is equal to the money borrowed plus fees and interest. This postdated check will be encashed by the lender only if you are unable to repay the debt. That’s just all you need to apply for a payday loan. The minimal requirements have gone a long way in making payday loans accessible to many people.
3. No collateral
Most loans in the market are characterized by requiring collateral such as car title loans, traditional bank loans, pawn loans and others. The fact that you need to possess an item to qualify for a loan becomes very hard for many people to access those loans.
Payday loans structured differently. You will issue the lender a postdated check that amounts to the same as the loan plus interest and other extra charges. This acts as a form of security for the lender; an assurance that. In the event that you can’t pay up, he will encash this postdated check to get his money back. Hence, there is absolutely no need for collateral in payday loans.
If collateral is put up for a loan, this means you run the risk of losing that collateral if you are unable to repay the loan. This risk is not present in the case of the payday loans as no collateral is involved.
4. The rollover option
Payday loans are typically short-term loans. This means they are loans that are required to be repaid when one gets his paycheck. For this reason, payday loans are due in about 30 days. However, you may be unable to repay the debt in full when the time comes. If this happens, you can roll over the outstanding debt. This simply means that the lender gives you another 30 days to repay the outstanding amount.
However, payday loan rollovers come with a little catch. It involves paying a little penalty. Sometimes, the lender may also review the interest rate. In a nutshell, payday loans are designed in such a way that you will not be pressured to repay it.
5. Credit checks
Payday loan lenders don’t quite require you to have a good credit score. In fact, sometimes they don’t even check if you have a good credit score. This is because payday loans are mostly taken up by people who cannot get a traditional bank loan because of bad credit. Another reason which the lenders don’t check credit scores is because they don’t need to use it to determine the security of their loans. The payday loan is already secured by the postdated check that you gave the lender when getting the loan.
The fact that credit scores don’t matter attracts a lot of people to payday loans. However, you must be fully aware of what you’re getting into when taking out a payday loan.
Unlike merchant cash advances, a payday loan is a loan legislated up to a certain extent by the government. This may mean that the borrowers are protected by the law up to some point. However. Payday loans don’t necessarily work in the same way across all states. Some have tougher control in place about payday loans than others. Thus, this could be an advantage for people who live in the states where there are proper and well-established regulations for payday loans.