While advocates of a payday loan say that this is the most convenient and fastest way to acquire money when they need it most, critics believe that it traps people to long-term debts. What are the reasons why people still choose to get a payday loan?
Payday loans are the quickest option for people who need cash right away to pay for expenses and emergencies, without the need to worry about the long approval process. Let’s take a look at its meaning, how it works, and the benefits it offers.
What is a Payday Loan?
Why choose a payday loan, also called a short-term loan, cash advance, payday advance loan, fast cash, bad credit loan, paycheck advance, or deferred deposit transaction is a small loan ($100 to $1, 500) that is payable on your next payday.
It is repaid one time during the borrower’s next payday, or when they receive income from their Social Security or pension. They have to repay it two to four weeks from the date of the loan as stated in the payday loan agreement.
How Does it Work?
You issue a post-dated check amounting to the full balance that includes fees to repay it. Lenders can deduct from your funds in your prepaid card account, credit union, or bank if you authorize them. Failure to pay it on or before the due date allows them to withdraw from your account electronically or cash the check.
Lenders do not consider your ability to pay the loan while ensuring you meet your other financial obligations. The loan is given as cash or check. It may also be received through a prepaid debit card or deposited into your account.
The features of cash advances vary. Some payday lenders allow “rollovers” to allow you to pay only the fees due to extend your due date. In some cases, it is structured so you can repay it on installments over a long period of time.
Now, let’s look at the benefits of getting a payday loan:
- Speedy process.
One outstanding benefit of getting this loan is that you can get it the soonest time possible. There is no waiting period. Once you qualified, you can get the cash within 24 hours.
If you applied online, you can get approved in as fast as 5 minutes. Unlike other credit loans, you have to wait for weeks or even months to process your application.
It is one feature of the loan that isn’t found in other types of credit. For instance, when you apply for a credit card, you have to wait for a long period while they check your financial background and know if you are creditworthy.
- No financial audit.
Applying for a payday advance loan doesn’t need your credit history. This just means that there’s a slim chance that you’ll be turned down on your application.
You don’t have to worry about your credit history because they are not going to investigate your past loans. If you have a bad credit record, it doesn’t lower your credit score.
- It’s unsecured.
One benefit that you can get for applying this loan is that it is an unsecured type of loan. It’s different from a car title loan or mortgage loan that is secured by personal property.
Even it is unsecured, lenders have access to your bank account. If you do not pay it, they can bring your case to court or send it to collections.
- Fewer requirements needed.
Usually, lending companies ask for requirements, such as a photo ID, Social Security number, a bank account, and a monthly paycheck. However, lenders only require a few fast cash requirements.
Don’t forget that having lots of requirements from banks or lending companies are designed to protect you. It is something that you should ponder of.
- It is flexible.
Unlike when you borrowed a mortgage loan, you can only spend it for your home and nothing else. However, this short-term loan is very flexible because you can use it whichever you want.