It is a fact that not everyone can have all the cash that they need, when they need it. There are all kinds of reasons why this might be the case. Some people might have inadequate income, others on the other hand might have lifestyles that are just way too much for their earnings. Whatever the reason, sometimes the need is so fast that people try to find different ways to get the money quickly.
One of the most popular ways of getting quick cash today is through personal loans or payday loans . Payday loans are short term loans that are supposed to be paid back on the date that the borrower receives his/her paycheck, hence the name for it and which is also the reason why it is also called a cash advance loan. The full amount that was borrowed together with the fees for the loan will be paid on the agreed date. In case the borrower does not have enough money on the agreed date then an extension could be agreed on. That would mean additional fees and charges.
Issues and Controversies
Bad credit payday loans are very popular right now because of several reasons which make it easy to use it. Though there are a lot of people who are using it as a means of getting quick cash, there are also those who are saying that it is not as beneficial as it seems. Both experts and even the government argue that personal loans online cause more problems than benefits in the long run.
Benefits of Short Term Personal Loans
There is no arguing that short term personal loans online can be beneficial. It has several characteristics which make it so. Here are a few of those qualities:
- Easy Qualification
- You Get Cash
Let’s go ahead and look at each benefit and discuss it in-depth.
One of the biggest reasons why short term bad credit personal loans or payday loans are very popular right now is because of the speed with which you can get it. When you know for sure that you need cash immediately, all you have to do is to go online, find a website of a payday lender and file an application on that site. In most cases you will just have to wait for a couple of hours in order to get your money. The use of the internet has made the whole process a lot faster than before.
The fact that it is very easy to qualify for cash advance loans is something that can be appreciated by a lot of people. There is no credit check involved with this type of loan. That means even those who have little or no chance for qualifying for other types of loans would be able to get personal loans when they want to regardless of their bad credit. The only qualifications that most payday lenders would need from you in order to give you a loan is that you should be working and that you are earning a certain amount each month. You would also be required to have a bank account, one that can be accessed through the internet. They might do some checking to verify your employment but that shouldn’t be a big deal. There is also no need for you to submit or fax in any documents that would back your application for many lenders. Less paperwork means less hassle on your part.
You Get Cash
This is something that many people overlook. When your application for a payday loan gets approved, the money will be transferred directly to your bank account. You can then get the money as cash which can be spent readily. That’s not always the case with other financial products. When you get a credit card for example, you can only get a portion of the credit limit of that card as a cash advance. With a payday loan, you get the full amount that you borrowed in cash, to spend as you see fit.
Bad credit payday loans are flexible in the sense that when you use a payday loan, you can spend it in any way that you see fit. The lender will be giving you the money without any restrictions on how you are going to spend the amount. It is totally up to you. That is not something that you can do with most other loans. For example when you get a car loan, the amount can only be used towards the purchase of a vehicle an you don’t have any control in spending it on other things.
We have mentioned that the use of the internet has made the application for payday loans a lot faster, but it also has bigger impact. The use of online processing has made it more convenient for a lot of people to go and get payday loans. In the past, borrowers would have to go personally to the office of the lenders and file their applications there. They had to find time to do that. With the coming of the internet, a borrower can file the application through the internet. Even the payment arrangement is done automatically which means you don’t have to make any move on your part when paying back the loan. You just have to make sure that you have the money on your bank account.
Payday Loan Problems
We have discussed how payday loans are beneficial to the people using them and why they are attractive to a lot of people today, now we come to the part where we will be discussing the disadvantages of payday loans. We have mentioned earlier that some experts and even the government have given warning to borrowers about the dangers presented by cash advance loans.
The Biggest Danger
The biggest danger that some government agencies have cited against payday loans is the high interest rate charged by the lenders. Most cash advance lenders charge APRs that are as high as 300%. That would be a ridiculously high interest for other financial products, but for payday loans that is more like the average. There are lenders that charge interests that are a lot higher than that and it is legal and accepted. The high interest is justified by the lenders as a way of recovering the risks that they are taking in lending to those who are high risk borrowers.
Most of the people who use payday loans are not well-off or they would not have turn to such an expensive source of cash. The high interest makes it hard for them to pay back what they have borrowed, since they would have to do that after a very short period.
Some experts say that one of the reasons why a lot of people turn to payday loans is they do not realize how expensive it would be. They state the interest that would be charged for the loans as flat fees. If they were to state it as APR or the annual percentage rate, then people would be more likely to think twice about borrowing because they would see how expensive it is.
There are many cases when the borrowers are surprised with how much the loan would cost them. Some lenders instead of taking out the payment as a one-time charge would stretch it out for several months and then take out the agreed fee each time. That causes the total amount to be paid to skyrocket. Since the borrowers have authorized the lenders to access their accounts, they can do little about it.
All these problems can lead to the borrower falling into a debt cycle. A debt cycle happens when a borrower is unable to pay the amount that he/she owes and is forced to turn to another loan. This would start a cycle where a borrower will soon become dependent on dent just to survive. Because a payday loan is easy to get, people usually turn to it. They forget the consequences of using it. There are a lot of people who are in this kind of cycle now and it is very hard to get out of it.
Alternatives That You Should Try
The good news is that you don’t really have to resort to payday loans in order to get by. There are plenty of things that you can do. There are other financial products that you can try which are not as expensive as cash advance loan.
The first option that you should consider is to getting your finances in order. You should cut down on unnecessary expenses and start living within your means. When you do that, you might be able to eliminate the need to borrow money. If there are emergencies where you would need some cash you can turn to people that you know and borrow the money from them. You can also use other financial products that are cheaper.
The bottom line is that using a payday loan is so expensive that you should only turn to it as the last option.