There are a lot of advocates for payday loans out there because they are available for people who do not have the best credit or no credit at all. On the other side of the fence, people criticize payday loans and say that they target minorities and people who do not make much of a salary and put them into an unfair cycle of debt that is nearly impossible to pay off. It can be easy to listen to either side of the spctrum and quickly become confused as to whether or not these loans are beneficial or if you should never touch them. This article will break down these lenders and explain what they are and the pros and cons of taking one out.
What are they?
Payday loans are small loans, usually only ranging between $100-$1,500 dollars. They give you the money upfront and expect you to pay it back in a lump sum within the next two weeks or on your next payday, depending on what comes first. You do not necessarily always hear it called a payday loan, it is often referred too as other names including:
- cash advance loan
- short-term loans
- payday advance loans
- fast loan
- bad credit loan
- deferred deposit transaction loan
- advance in a paycheck
These loans are available especially for people with bad or no credit at all so that they can get cash as soon as they need it should an emergency arise.
Pros Of These Loans
They are easy to get:
The biggest benefit of these loans is the fact that they can be accessed so easily. Most lenders can get the money to the borrowers within 24 hours and can tell you whether or not you are approved for the loan in a matter of a couple of hours. There are some loan companies that are open 24 hours a day, 7 days a week so you can apply and get a loan literally any time day or not.
They do not have many requirements
With a traditional loan through a bank or large loan company, you will need to provide a social security number, proof of ID, proof of your income, and verify the fact that you will be able to repay the loan back over a set amount of time. Meanwhile, these bad credit loans only require you to:
- Be 18 years old or older
- have a social security number
- proof that you have a regular job and income
- Have an open bank account where the money can go
Your credit does not get checked
Most loans require you to have a certain credit score in order to get approved which can certainly be stressful for people with poor credit. These loans do not check your credit and in fact can help you build your credit and move on to better finances in the future.
They are very expensive
These loans have insanely high-interest rates meaning it will be very hard and expensive to pay them back.
Most people consider them predatory
These are defined as not being fully upfront with all of the repayment terms. The lenders often do not check whether or not you can repay the loan and are often more unaffordable than anything.
They can easily trap you into a debt cycle if you are not careful and charge additional fees if you cannot pay for the loan upfront or if you are late on paying it one month.