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Payday loans – Why Should You Opt For Them And Why Not?

Payday loans – Why Should You Opt For Them And Why Not?

Anyone might face a situation where there is an acute shortage of funds. Given the increasing number of flexible loan options, financial crisis situations can be easily handled these days. When we talk about the loan options there are many of them that differ in terms of the interest rates, eligibility criteria and the loan repayment options. For those who are looking for flexible loans that do not dig too much about the credit history, payday loans are easy choices. There are numerous reasons why people opt for payday loans.

  • Credit score worries are gone!

With most other loan options you would have to focus on your credit score, securities, and other factors. You would be able to increase your chances of getting the loan by working on the factors affecting your credit report. But when you opt for a payday loan your credit score doesn't matter. Even if you are someone who has no credit history you can easily get a payday loan.

  • Easy qualification

There aren't any discriminating factors that would affect your eligibility for the loan. As long as you are in the legal age for loan application and as long as you have a steady source of income getting a payday loan is pretty simple. The application process itself is simple in most cases. There are numerous lending agencies that process payday loans online. Within a matter of a few hours, you can have the loan amount credited in your account.

  • Do not worry about being caught in the loop for a long duration

With most loans, you would only find long-term repayment options. With payday loans, you do not have to worry about periodic installments eating away your monthly income. The payday loan amount along with the interest amount is deducted from the furnished bank account on a predefined date which is revealed right at the time of approval of the loan. This is a short-term loan mostly repaid within a few months. So you can quickly repay the loan and work on raising your credit scores again.

  • Use it for any purpose

Unlike the conventional loans, there is no need for furnishing the details of the purpose for which the payday loan is applied. The loan amount could be used for any financial commitments. So for all those situations where there is an emergency need of funds payday loans are great choices. If you find yourself in a financial crisis situation where you cannot pay an installment of another loan, or if you have some personal emergencies that call for immediate availability of funds you can choose payday loans.

  • You are protected by the law

In most of the regions, there is stringent legislation governing the payday loan lending process. This prevents lenders from imposing high-interest rates for the loans. So if you are applying for a payday loan look for a lender who is a certified and licensed lender bound by the law. You would be protected from large interest rates and also have the assurance that you are obtaining a legally valid loan. There are no predefined rates implied by the law – but there are caps placed to limit the highest chargeable interest rate.

  • Easy to obtain large loan amounts

Unlike most other loan options you would not have to be bound by tight loan amount limits. With most loans, there are numerous factors that determine the maximum loan amount that can be granted – like the credit score, income, other loans etc. In the case of payday loans, your income alone determines the loan amount you are eligible for. One other factor that most people are not aware of is that faster repayment of payday loans further increases your loan amount eligibility in the future. Finally, it is the local legislation that sets a limit on the maximum permissible amount of payday loan.

  • Quicker processing times

During times of emergencies, most people are not in the situation of going through tedious documentation procedures to apply for a loan. Gathering the essential documents and then waiting for the loan approval to happen and finally for the loan processing to occur is all time-consuming. With payday loans, all these happen within a matter of a few hours or utmost within a day or two. Funds are instantly transferred to your account and this makes this loan a perfect choice for emergencies.

 

There are a few drawbacks as well

As attractive as payday loans are they do have a few limitations you should know about. Getting to know these would help you prepare yourself for what lies ahead when you choose payday loans.

  • Higher interest rates are the first main challenge that any borrower faces. The interest rates are higher than most other loans. But if there is a local law setting a limit on the interest rate then you would be saved from paying large amounts in the form of interest.
  • Given that payday loans are very easy to obtain and given that the timely repayment increases your eligibility amount, this sometimes gets people into a dangerous cycle of borrowing and repaying loans. If you rely on payday loans only in cases of dire emergencies and make sure that you repay it on time then you do not have a thing to worry about.
  • When you repay a payday loan on time and clear all your dues then you have a good chance of increasing your credit score again. But getting too many payday loans and having trouble repaying them would have a bad impact on your credit score.

The best option to get funds while also maintaining your credit scores is not to stay away from all types of loans but to choose the right ones and repay them according to the terms. Diversification of the source of funds would be good for your credit report in the long run. This would also cut off any dependency associated with a single source of funds.



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