Payday loans are a fast and convenient way to get a few extra dollars in your account. Moreover, these loans may be ideal for covering an unexpected expense. After all, they are relatively easy to qualify for and you may have access to the money by the end of the day.
Despite this, payday loans are not ideal for every situation. To help you make your own decision, we will outline a few of the benefits and costs of payday loans online.
Benefits of payday loans
Thinking about applying for a quick cash loan online? Here are a few of the benefits.
Generally, it is much easier to qualify for a payday loan than finance from a traditional lender like a bank. This is because payday lenders are often willing to consider some less-than-perfect applications.
So, your bad credit score may not affect your chances of approval. For example, if your credit report is looking a little bruised from a past bankruptcy, you might still be considered for approval.
Finally, the application itself is usually straightforward. While traditional lenders may require you to fill out piles of paperwork, applying for instant payday loans is usually simpler and may only take a few minutes.
Bad credit welcome
As we mentioned above, payday lenders are usually more forgiving of bad credit.
Certain payday lenders may even assess your application without checking your credit history. This is known as a no credit check loan.
If you apply for a loan without a credit check, the lender will, obviously, not access a copy of your credit report. Instead, lenders will focus on your current income, expenses and overall ability to repay the loan.
Fast processing speeds
We’ve established that applying with payday lenders is quick and easy. What happens, however, once you submit your application? Well, the good news is payday lenders will often be able to provide a fast outcome.
Depending on the lender, you may receive an outcome within minutes of applying. If you’re approved, lenders will offer you a loan contract. Keep in mind, your funds are only transferred if you approve this contract.
Access to your cash will depend on the lender and inter-bank transfer speeds. However, you may be able to expect your cash the same day you apply, or within one business day.
It seems so much of life takes place online in this digital age; accessing credit is no different.
Most payday lenders will have a 100% online application. This means you won’t have to supply any physical documentation or paperwork. In fact, you may not even have to speak to anyone over the phone.
Simply apply online with your mobile device or computer, follow the steps and boom – cash in your account!
While payday loans are more expensive than other forms of credit, repayments are not complicated.
Some lenders may be able to set up a direct debit from your account. Therefore, your repayments are automatically deducted as per your repayment terms.
This may make things easier for you, as you will not have to remember to manually make repayments. In short, all you need to worry about is making sure there is enough money in your account whenever the payment cycle rolls around.
Costs of payday loans
Now, we’ve been over the benefits of payday lenders, let’s take a quick look at a few of the downsides of payday lending.
Payday loans often carry a high level of risk with them. This is because lenders often offer these loans to borrowers with poor histories of repaying lenders. As a result, these lenders will often charge high rates and fees to cover this risk.
This may make your regular repayments quite high. Moreover, you will be charged penalty fees if you miss repayments. These fees can be expensive, and can quickly spiral out of control.
Short repayment terms
Generally, payday lenders offer short repayment terms. These could be anywhere from a few weeks to months.
The shorter your repayment terms, the less you will pay in overall interest. However, your regular repayments will be higher. After all, the regular repayments for a $2,000 loan over 3 weeks will be higher than over 3 months.
As we mentioned above, you get charged penalty fees if you miss repayments. So, while you have the option of settling your loan sooner rather than later, you also potentially run the risk of unmanageable repayments.
A payday loan is a legitimate form of credit, offered by fully-licensed credit providers. They do, however, cater to people in emergency situations. As such, other disreputable lenders may operate in this space and aim to scam desperate consumers.
Therefore, always be cautious when applying for loans online. In particular, always confirm the lender is licensed by the appropriate authorities. In addition, read consumer reviews of the lender online before making a decision.
Payday lenders may indeed be a helpful option in certain situations. You can cover the emergency expense quickly, and then concentrate on repaying your loan.
On the other hand, payday loans are not for everybody. Taking out a loan that you cannot afford may leave in you in a worse financial situation than before you started. So, carefully weigh up your options before making a decision.
About the author
Seb Kirkpatrick is an online content writer with an interest in the fintech industry.