Pros and Cons of Payday Loans
With all the economic troubles continuing to plague the public these days, it should come as no surprise that payday loans seem to be available anywhere and everywhere. There are ads for guaranteed payday loans all over television and the Net, so you may be wondering if you should look into a loan. Before you do, it is very important to consider the pros and cons of these loans to make sure you need to apply.
Pros of a Payday Loan
One of the first things to know about a payday loan is that it is a loan that is borrowed over a short term. Those who have bad credit or poor credit are typically the ones who seek these kinds of loans for a variety of reasons but usually in the case of an emergency such as unexpected car trouble. Conventional long-term bank loans are unavailable to these loan seekers because of the risk, so a short-term payday loan may be the only option.
This is only one of the advantages to these loans. Another is that the application process is easy. Most of these loans have an online application process. While some verifiable information such as proof of income such as employment, social security or alimony is required, applicants usually do not have to enter sensitive information such as the social security number or sometimes even an address.
Furthermore, the process is usually quick. The application itself may only take a few minutes to complete and in most cases now, there is no need to fax information. There may be a few other requirements such as a minimum monthly income of about $1000 and a minimum age of 18, but these factors can vary according to each individual institution. Applicants may also be required to have an active checking or savings account, but this also means that money is directly deposited quickly.
In many cases, applicants can also choose the amount of time they have in order to pay back the loan. While some may take as little as seven days, others may need a full 30-day term for repayment. However, most of these loans are usually taken out over a two-week period. If applicants are able to pay within a shorter time period, they may also have the chance to pay lower fees and interests depending upon the lender.
Cons of a Payday Loan
Of course, with its good points, there are also a few disadvantages to consider when it comes to payday loans. One of the major cons of short-term loans is that they are often subject to exorbitant interest fees. These fees may not only vary according to lender, but they may also vary according to state. In fact, states like Nevada and Texas often have interest fees that total more than 100% of the loan given.
There can also be many other penalties and fees for those who do not pay back their loans on time. Since money is taken directly from the savings or checking account to which it was given, the lenders have access to this account and will claim their repayments on the agreed upon date. If the money is not available and an extension not granted, there are other fees and penalties added to the interest.
Also, the institutions granting these loans are not banks. They are private lending institutions. Furthermore, most of them are not based within the United States. They are able to provide loans to anyone they choose, but it is important to be careful when dealing with an international entity. The laws and regulations may not be the same as those that govern American banks and lending institutions.
Applicants who are not comfortable dealing with financial matters online also need to make sure their information is safe and secure. Since many of these institutions are internationally based, it is important to make sure all security safeguards are taken to protect information from all applicants. The site should have a viable encryption system and allow access to protected information only through password and other safeguards. If there is any doubt about a site's security, then it is best to look for another source that appears more reputable.