Payday Loans Pros and Cons

Payday loans, also known as payday cash advances, are loans made against your salary. Payday loans have become too mainstream when it comes to bad credit borrowing, because there are no credit checks required. With payday loans, you only have to provide your proof of income, and if the lender approves your income against the amount you intend to borrow, you can get a loan successfully.

Pros

Instant cash. Payday loans also involve fast and hassle-free application, in fact, most applications nowadays can be done online. You can receive instant decision and get your money within the same day after your application got approved.

Easy requirements. With payday loans, you don’t have to stress over a lot of paperwork. Basic requirements you’ll need are proof of ID, proof of address, and proof of income, and as long as you have all these, you are most likely to get accepted.

No long-term commitment required. Because you will have to pay off the loan on the next payday, you don’t have to deal with years of consistent payments, provided that you pay off the loan on time, of course.

No credit checks. Meant for borrowers with poor credit, payday loans don’t require credit checks, meaning you can get your cash quick and easy even if all other lenders have turned you down.

No collateral. A payday cash advance is an unsecured loan, meaning it is not backed up by any asset. This means there’s no property to seize if you fail to meet your repayments.

Cons

Small borrowing limit. Because there’s no collateral to back up the loan, the amount allowed for each borrower is pretty small. Additionally, there’s only a certain portion of your salary that you can borrow. Payday loans are ideal if you need to pay small, urgent expenses that you’ll surely be able to settle on your pay date.

Very expensive. Because payday loan is a bad credit loan that poses a huge risk on the lender, it is offered with very high interest rates, even higher than the already expensive logbook loans.

One lump sum repayment. Unlike other loans which are spread out on several instalments, payday loans are required to be paid off on your next payday in full. This means that if you don’t have sufficient funds on your next pay date, this will roll over onto the next and earn interests as well.

For many people, this scheme is just unaffordable. Many fail to provide the lump sum needed given the short span of time, which is why a lot of payday loan borrowers end up in a revolving debt that won’t ever clear up. Most of the time, it is best to opt for a loan with flexible repayment terms.