Pros and Cons of Payday Loans
There has been a lot of debate whether payday loans are good or bad.
No matter which side you’re on, it always comes down to your risk aversion. If you’re a type of person that is willing to enter such an arrangement loan will be nothing more than a temporary nuisance.
Most people frown upon payday loans seeing them as a loan shark technique. This is mainly due to their nature where you can easily and conveniently get your money online and start using it within a day. As you well know most people perceive fast cash as volatile.
Truth is completely different.
In order to better grasp the situation, let’s go over all the pros and cons.
Speed is the main benefit of payday loans.
Sometimes, you can get fast cash and start using it within a day. In most cases, you will get your cash the following day but you definitely won’t have to wait longer than that.
If you have a steady job or a steady source of income, this means you’ll never have to worry about the money. Naturally, there will always be an interest but it still beats running low on cash.
For example, this can be a life saver for entrepreneurs who require a steady cash flow to maintain inventory.
When you apply for a traditional loan, you have to state purpose and to have numerous meetings with a loan officer. Even with all of that, there is no guarantee that you’ll get your money. This is a real burden for anyone especially if you have to skip work in order to attend these meetings.
On the other hand, when applying for a payday loan, you can even do it from your computer. Application process is really simple and usually done online. Application process is really simple and usually done online, for example you can check ElcLoans.com where even bad credits are welcomed.
Applying for a traditional loan is an unproductive way of spending your time and if you’re an entrepreneur, it can pose quite a burden for your company.
Worst thing yet is being reliant on that money and still not getting it.
Payday loans allow you to make feasible operational plans as you can always trust your creditor.
Protecting your credit rating
No matter how stable your income may seem bad things do happen. Truth be told, most of the Western world is indebted and sooner than later you will find yourself between jobs or projects. Although this period may be short not having a cash influx may prevent you from paying your installments.
In terms, this can jeopardize your credit rating and affect your future borrowing.
Great thing about payday loans is that you can get them even if you have a bad credit status. Anyway, your credit rating will be checked and assessed but bad credit status doesn’t instantly disqualify you from getting a loan.
Amount you can get
Although payday loans seem perfect they have their drawbacks.
Logically, given the simplicity and quickness of the process, you are limited in terms of how much money you can borrow. Sometimes, loans go up to $1000. This may seem low but as I mentioned before, it can be a life saver in certain situations.
Have in mind that the amount varies from state to state. In some states, the amount is capped by state laws.
On the other hand, in some states payday loans are prohibited. Residents of Arkansas, New York, Vermont and West Virginia are not eligible for payday loans.
This limit can go up a bit if you have a good track record with a creditor. Nevertheless, it isn’t an ideal solution if you require larger purchases (e.g. facility equipment).
Paying on time
Payday loans are expensive. This is why they should be taken when you’re in a dire situation. Nevertheless, they can quickly and easily solve your immediate financial issue and most people will be able to repay them when they get their next salary.
But that is not the problem.
The main problem occurs if you do not pay on time. If that is the case, high interest will slowly start amounting.
Then again it all comes down to your seriousness. If you’re fair, you won’t have any trouble with your creditor.
Although payday loans may seem like a bad solution, they are actually a great method for staying afloat.
Whether you need one to pay your bills or to cover ongoing expenditures, this type of loan is definitely something that can get you out of a pinch.