Pros and Cons of Payday Loans
No matter what area of business you look at, each industry has its gray areas or topics that are constantly the seed of heated debates. The payday loan industry is no exception. Payday loans and payday loan lenders have been a constant topic of debate among financial analysts, customers, lenders and the like. Whether you approve of them or despise them, payday loans are at times a necessary evil for those who need quick cash and like anything else, have their pros and cons.
Payday loans can actually be very useful and help out tremendously in a financial time of need, when other financial institutions are not willing or able to accommodate a person’s financial need. Many times banks or credit unions will not approve loans for such small amounts In addition, local financial institutions may also take into account a person’s credit or run their credit history to see if the person is eligible under their guidelines.
With the Internet becoming more of a standard in daily life than an exception, payday loan lenders have expanded their services online. Many have websites that offer customers around the clock service and applications. This allows the customer to be able to apply when their time allows it and allows for quicker information transfer and faster approvals.
A payday loan can be applied for and approved online in a very short amount of time. This means that, once approved, money can be directly transferred to the banking account of the customer’s choice, with the added perk of not having to put up collateral as one might be required to do through other lenders. This financial arrangement also helps for those who find it embarrassing to ask for financial assistance from friends or family.
While payday loans are an exceptional way to get money in a bind, they also have strings attached. Due to lenders not performing a credit check or researching a person’s credit history, the lender takes on a financial liability when lending a customer money. Because the lender is taking a risk, many will approve customers for payday loans that have a higher than average interest rate.
The higher rate is the lenders way of paying themselves back for taking on a customer, without checking their credit. Most payday loan lenders do not perform credit checks. Since the loans are viewed as short term loans, the lender takes on the liability of the borrower, foregoes a credit check, and takes the financial risk of lending money to a customer.
Many payday loan lenders will also only approve customers up to a certain amount and in the grand scheme of things $500 or so is still considered a small loan amount. It’s highly unlikely that one could find a payday loan lender that would be willing to take a risk of lending out a payday loan for a few thousand dollars. This is where it’s important to evaluate your monthly income. Before you take out a loan, check your pay schedules and make sure you’ll be paid again before your loan is due. Otherwise you may have to make a partial payment and extend your loan, consequently adding more fees to your principal.
Payday loans are also not to be used as a budgeting plan or any sort of financial plan. They should be used strictly as a means to an end. These loans are intended to serve the needs that may occur in a short amount of time. When used correctly and paid back on time, payday loans are a useful financial assistance tool.
What payday loans boil down to is personal responsibility. The responsibility to repay the loan rests on the person taking out the loan. As adults, people no longer have or need parents or others telling them what to do and how to get or spend money. The fact of the matter is payday loans are a personal choice of the customer. The payday loan industry is providing a service to a customer base that needs money from alternative sources, as traditional means of lending are not an option to them.