Payday loans are small soft amounts of money ranging between $100 to $ 5000. The loans can be used to sort out your emergency financial needs that can’t wait until your next payday. These loans are easily accessible, with a short approval and repayment period.
If you are not familiar with the term payday loans, you may have heard of others like paycheck advance, deferred deposit transaction, bad credit loans, fast loans or fast cash, cash advance, among others.
The most outstanding feature of payday loans is their quick access and the minimal consideration of your poor credit scores.
Pros Of Payday Loans
1. Easily Accessible
Payday loans are easily accessible, helping you instantly solve emergencies and other financial needs. Payday loan approvals occur between two to five minutes after you complete registration. Most lenders give out the money within one working day.
Compared to traditional loans, you can get instant loans at Viva Payday Loans within a short period after approval and cater to any financial problems in which you are stuck.
2. Minimal Requirements
When applying for a loan in a traditional banking institution, you have to present income proof, photo ID, credit score, and various requirements to show you’re liable for the loan and capable of repaying it.
On the other hand, payday lenders request a few details from you without making the process too lengthy. The most appealing part is that you don’t have to produce a high credit score or proof of income to get the loan approval.
A payday loan application only needs you to:
- Be 18 or more years old.
- Produce your social security number or ID issued to you by the government.
- Give details of your bank account.
- An income source or job that’s regular.
These details are easy to acquire, shortening the application and loan approval period.
3. Loan Approval Despite Low Credit Scores
Compared to lenders from traditional financial institutions, payday loans don’t require you to present a high credit score. You can access payday loans even when other lenders decline your application based on your poor credit scores.
This gives you time to rebuild your credit score and acquire a more significant loan amount in the future while enjoying the soft loans at present.
4. The Loan is Unsecured
Mortgages, car loans, or auto loans are tied to property as security seized upon default. However, payday loans don’t need to be secured, and you won’t lose your property when you’re unable to pay it back.
The only major requirement from payday lenders is your bank account details which can be risky after default. However, you may encounter debt collectors sent to you default payment.
5. Come in Handy for Short-Term Emergencies
The main advantage of payday loans is they come in handy when you have an emergency. When applying, you are not required to state the exact need or reason for seeking the loan, and you can freely spend the money to shop for groceries, top up the cash you already have, fuel your car or cater to the general needs of your household.
These loans are also helpful when your credit or debit card is declined, and you have to purchase the item in question. They help you survive bad financial days or weeks until you receive your income.
Cons Of Payday Loans
1. They’re Expensive
Payday loans come with high interests and other hidden costs. The additional costs and interests can amount to up to 400% of the principal, which is higher than traditional loans.
2. They Are Regarded Predatory
Predatory loans come with unaffordable and unfair terms, as well as misleading information that may not match what’s happens practically. Payday loans have predatory traits seen in the additional costs and high interests despite their quick access.
Other predatory features of payday loans are:
- Lenders are less bothered by your ability to repay the loan or the likelihood of default. When your payments are late, you are allowed to roll over to a new repayment period but with added fees and higher interests.
- Despite your low credit score, you can acquire payday loans, but they do nothing to better your situation. That’s because most of them are unregistered with credit bureaus, making it hard to track your progress on loan reports.
3. Pushing Lenders into a Debt Cycle
Since most lenders allow you to roll over or extend the loan repayment period, you can easily fall into a debt cycle trap. Each time you ask for an extension on the repayment duration, you are increasing your time as a borrower and adding to the amount you’re required to repay in the end.
Research shows that most payday loan borrowers take the loan up to 9 times before their names are cleared from the list. These loans are borrowed repeatedly to the advantage of the lender but a disadvantage to the borrowers who remain tied to the debts.
Wrapping It Up
Payday loans come in handy to bail you out of a quick financial crisis before you can access your salary. They are advantageous in that you can get approved regardless of your credit score, employment status, or availability of security. The process is quick, and your money gets into your bank account within a day of application, helping you fix the problems fast.
However, everything comes with a downside, and for payday loans, the main cons include high interests and additional costs. It’s also easy to have a repetitive debt cycle as you roll over the loan or apply for new ones after successful repayments of your previous loans.