The Pros and Cons of Payday Loans

17 May, 2013

Payday loans are a type of loan that you can get to help you out in case of an emergency and you go not have the money. These types of loans are usually for two weeks because most people get paid every two weeks. There are some payday loan companies will let you go a month if you receive Social Security or some other type of benefit that you only get paid once a month. As with any type of loans there are pros and cons to getting them and it is advisable to know what they are before you even consider getting one of these loans.

Pros–Most of the payday loan companies are easy to use and require minimal information to be eligible for a payday loan. Most of the information that they require are a paycheck stub, current bank statement, a blank check, and proof of address. You will also need the names and address of references, but how many you need will depend on the company. If you are receiving some type of benefits you will need a statement telling them what you are getting. If it is direct deposited the company may just take the bank statement showing the deposit as proof.

They also offer easy re-payment plans and if you cannot afford to pay it back on the day it is due, you repay the loan including the interest and then you just reapply for another two weeks. How many times you can do this depends on the state where you live. Most of the time you can be in and out with an approved payday loan within thirty minutes, maybe less. It will take a little longer the first time because you have to fill out an application and everything has to be checked out before you are approved.

Cons–One of the biggest cons is the interest rate. For example, if you borrow one hundred dollars you will pay back one hundred fifteen dollars so for a loan for two weeks you are paying fifteen dollars in interest. Some may say that is not high interest but for a two week loan it is a little high. You do have to be careful that you do not get caught up in the merry-go-round of payday loans were you are depending on them to get you from payday to payday. If you do not pay off the payday loan in time there are some hidden charges and fees that can occur. Since there is no credit check performed the lender is taking a risk of that person paying back the loan so that is why their rates are higher.

As you can see there are just about as many pros as there are cons when it comes to taking out a payday loan. According to Holly Mamoru, it is vital to make sure that you know what you are getting into before you take one out. One last pro is that you do not have to have perfect credit to get a payday loan. You should also make sure that you do not abuse payday loans and use them only in an emergency because you need to remember that what you borrow plus interest is coming out of your next check.

Tags: Credit, Debt, Loans, Money, Payday Loans, Personal Finance

Tuesday, October 18th, 2011Credit

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