Emergencies are unavoidable, and we mostly need cash to sort them out when they occur. Payday loans are a popular type of loan for people with emergencies. These are short term loans that are guaranteed for about two weeks. They are referred to in several terms such as emergency loans, deferred deposit transactions, paycheck advance, and bad credit loans, among many others.
They are also commonly referred to as fast loans because of the speedy availability of funds. You can access these loans even when you are weak financially and have a bad credit score. These are some of the reasons why payday loans are popular.
Some people don’t advocate for these loans, but are they right? Here is an overview of some of the reasons why payday loans are beneficial.
1. Accessibility
This is one of the main benefits of payday loans. They are easy to access, as some online lenders operate 24 hours, seven days a week. Many traditional loans require you to visit their physical office, fill application forms, and wait for a couple of days to weeks to get approved. Payday loans, however, take as little as 5 minutes.
2. No Credit Checks
With many traditional loans, you need a good credit history to be considered eligible for a loan. With no credit check payday loans, even people with a bad credit history can get approved. This is a good alternative if you have a low credit score that is preventing you from accessing a traditional loan.
Besides, payday loans are a great way to protect your credit rating. With traditional loans, you mostly make the repayment in installments. Anything can happen in between payments. An emergency perhaps, or you can lose your job. This would mean that you won’t repay the next installment, hence hurting your credit score. Payday loans protect you from this because they have short repayment periods. You can protect your credit score while still accessing loans.
3. Fewer Requirements
With traditional loan lenders, you must fulfill a myriad of requirements to be eligible for loans. These requirements include a credit check, social security number, your photo ID, proof of income, collateral, and many others. Furthermore, you need to ensure that you will repay the loan.
Payday loans, however, have fewer requirements. With a consistent income that is verifiable, you are almost assured of being eligible; you also don’t need any collateral. Your income alone is proof enough that you can repay the borrowed amount. You will also be required to have proof of registration as a permanent resident of the said state.
Primarily, here are the following basic requirements for a payday loan:
- At least 18 years of age
- Social Security Number or Government ID
- An active bank account
- Regular job or other sources of income
Some online lenders may check your credit score but base their decision on your financial situation. Also, remember that you are writing the lender a check from your next paycheck when you get a payday loan. You give them the authority to withdraw the said amount from your salary on the due date.
4. Short-Term
The average repayment period for a payday loan is two weeks. Some people may view this as a bad thing, but it eventually saves you money. Other traditional loans have a long repayment period. This doesn’t necessarily become beneficial to the borrower. Why? Interest rates.
The shorter the repayment period, the smaller the interest you accumulate. The money you save on interest makes it easier to repay the loan on the due date.
5. Convenience
Anyone would love accessing cash from the comfort of their home. Payday loans are usually processed, and interactions are carried out online. Besides, the application process is quite straightforward.
With traditional loans, application processes are usually tedious and tiresome. You have to visit the bank or lender, talk to a loan officer, and fill countless application forms. Further, you have to keep calling the loan officer to ask about your application status.
When applying for a payday loan, you fill the application form online. The paperwork is minimal, and you don’t have to fax the documents to the lender.
6. Fast Cash
Traditional and bank loans require you to wait for a minimum of three to four business days before you know your application status. This makes them not suitable for people with emergencies. You are also not assured of approval. Imagine waiting for four days, only to be rejected.
Most payday loan lenders usually approve your loan in one hour after you’ve provided the necessary information. The application process is as seamless and straightforward as it could get. The lender might take a few hours to deposit the cash in your account, but you’ll most get it on the same day or the following working day. Some lenders will even transfer the funds within one hour. They do this to stay competitive in the payday loans market.
7. Interest Rates
Payday loans have, for some time, been perceived to have bad interest rates. This is not necessarily true. Payday interest rates are flexible and smaller compared to traditional loans. The interest rate charged on your credit is dependent on a few factors, such as credit score.
If you have a good credit score, you will get a reasonable interest rate. Also, those with low credit scores can get a fair deal. All you need to do is take some time to shop and consider your options to get a good deal.
8. Confidentiality
For most people, giving their personal information, such as bank account details and personal ID, is hard. This is because they want to be assured of confidentiality. With payday loans, you don’t have to worry about privacy because your data is always safe. Payday lenders are not authorized to share your personal information with third parties. You shouldn’t worry about your information getting on the wrong hands.
9. Many Lender Options
With traditional loans, you can only borrow from your bank. This is not the case with payday loans. You are not limited when it comes to lenders. There are many private lenders from whom you can borrow.
However, you shouldn’t just choose any of them. Make sure you do some research to find a reputable lender with a solid background. There are many websites with reviews about online payday lenders. This information will help you make the best decision possible.
10. Unsecured Debt
Payday loans are unsecured debt. This means that you don’t have to place your property, such as your house or car, as collateral. This will allow you to secure the most favorable deals without putting yourself suffering from the risk traditional loans have.
With traditional loans, once you are unable to repay the amount you borrowed, your property is taken as the lender seizes the property you placed as collateral. This way of handling unpaid fees makes traditional loans unfavorable and notorious.
Payday loans give the lenders access to your bank account as a condition for the loan while they are not secured. This is a different type of risk if you are unable to repay. The lender can also take other measures such as using debt collectors or suing you in a court of law over unpaid debts.
11. You Can Qualify for a Higher Loan Amount
Payday loan lenders may limit the amount for first times borrowers as you are only eligible to take a loan within your salary range. Once you have paid off the first payday loan on time, the lender can increase your loan amount in the next loan applications. For example, if you apply for $400 on the first application, then pay on time, the lender can double your loan limit to $800. This will depend on your salary and the lender’s lending policy.
State laws and legislations determine the minimum and maximum amount that you can get from a payday lender. The lender informs you of the amount you are eligible to obtain during the application process. Keep in mind that paying off your loans on time creates a good relationship between you and the lender. This gives you timely access to solutions when you are facing an emergency.
12. No Limits on What you Can Spend the Money on
Traditional loans dictate how you spend the amount borrowed. For instance, you can only use a house mortgage to buy a home, property, or a car loan to buy a car. Payday loans don’t bind you to such limits. Once your loan application has been approved, you can spend the money on anything. The lender is not concerned with how you use the money.
Conclusion
Payday loans are a good option for emergencies and financial disasters. They are easily accessible and relatively fast. You don’t need to have a good credit score or to have collateral to access these loans. There are many online payday loan lenders to choose from. Make sure you research to ensure you select a reputable lender.
Lastly, make sure you repay the loan before it’s due. This helps build a stable relationship with your lender and avoid other unpaid debt issues.
