A payday loan has long been touted as a predatory loan that entraps borrowers in a vicious cycle of debt that they can never repay. However, this couldn’t be any further from the truth, so long as they are used responsibly. The truth is that a payday loan is an incredibly useful financial tool that, when used appropriately, can not only help you address a financial shortfall, they can wind up costing you less than other forms of credit. Here is what you need to know about them.
A Payday Loan Doesn’t Require Credit Approval
A payday loan is a short term loan that allow borrowers to get an advance on their next paycheck in order to address an unexpected financial shortfall. They are easy to get because they don’t require credit approval. This means that people with all types of credit from excellent to poor can qualify for a loan. All you need to have is a steady job (with paycheck stubs) and an active bank account. A Payday loan also doesn’t require a hit on your credit for approval, they also don’t report after they are settled, meaning that they don’t affect your credit rating at all, unless you don’t pay and they send the loan to collections.
Payday Loans Disperse Immediately
Unlike other types of personal loans, payday loans allow you to get your money immediately upon approval. You can go from application to funds disbursement in less than an hour in some cases, overnight in others. This makes them perfect for addressing financial emergencies.
Payday Loans Don’t Require Collateral
Unlike personal loans for people with bad credit, a payday loan doesn’t require the borrower to pledge personal property to secure the loan. This means that the borrower is not in in jeopardy of losing any property to repossession in the event that the loan cannot be repaid. That doesn’t mean that there are no repercussions for nonpayment. It just means that you won’t have a repo man knocking at the door.
A Payday Loan is Usually Cheaper Than Other Forms of Credit
This is where many financial experts will disagree, but payday loans are often a less expensive choice for borrowers than traditional forms of credit. They carry a much higher APR than other loan products BUT because the repayment term is so short, you wind up paying much less during the term. And, they are way less than paying two overdraft fees at your bank.
With all of these benefits, it’s no wonder why payday loans are so popular. Unfortunately, they aren’t always the best choice for addressing financial shortfalls. Payday loans, like other forms of credit, should be used responsibly. If you are not going to be able to repay the loan, in full, at the end of the term, you should choose a different form of payment.
And, they should only be used in emergency situations and not for casual shopping trips. And lastly, managing your money effectively should be your ultimate goal. If you find that you are relying on payday loans to pay your living expenses, you should reexamine your budget and make necessary changes in order to prevent you from having to finance your lifestyle.
A payday loan may be the perfect solution to your short term financial needs. Visit PersonalMoneyStore.com today to learn what can be done for you.