There are a few different names for payday loans like – paycheck advance, bad credit loan or deferred deposit transaction etc. Whatever be the name, they are a typically short-term small dollar loan which is due in a single payment.
It’s true that this makes cash loan available to people who don’t get it otherwise or find it difficult due to their poor or no credit score and they can be availed in real quick time. But there are also some negative effects that you need to know about as a potential borrower. Let us consider the advantages and disadvantages of Quick Cash Loans.
Here are the reasons for which people opt for payday loans
- Easily accessible: Easy accessibility is one of the most prominent positive sides of quick loans or payday loans. Most lending companies offer quick almost instant approval and the borrower can get the money in account within 24 hours. Moreover, there are lending companies offering their services 24×7 and one can also apply for loan online. So, the tedious process of approval involved with traditional loans is missing here and that surely has an attractive ring to it.
- Minimum requirements: Compared to traditional loans quick loans have fewer requirements too and anybody who is above 18 years of age with a secured income and active bank account in possession of government issued social security number or ID proof is eligible. This makes Payday Loans Centrelink really convenient.
- Credit History: Quick loan companies don’t check out the credit history of the applicant and anybody with a poor credit history can get his loan application approved.
- Unsecured: payday loans don’t involve any property or commodity as guarantee for payment. Instead, they have access to the borrower’s bank account. They can’t seize your car or house if you don’t pay back in time, but they can take you to the court.
Some of the major disadvantages of payday loans are as follows –
- Expensive: Compared to traditional loans they area lot more expensive and requires you to pay an interest rate of as high 24%. Along with this you also pay up around 5% of your borrowed amount as transaction fee.
- Can be predatory: Quick online loans with their exploiting, unaffordable and almost unfair terms can trap a borrower in a debt cycle. If the borrower can’t pay back in time they could be drawn to the courts and face a lot of harassment.
- Access to bank account: Quick online loans don’t require you to submit documents or guarantee, instead they have direct access to your bank account most of times. Sometimes the borrowers are required to submit a post-dated check for the entire amount, or the amount can be electronically deducted by the company after the payment date.
- Debt Cycle: Getting trapped in a debt cycle and ruining their credit rating is the greatest danger that borrowers face with quick payday loans
If you are thinking about getting some quick loan for a short time – payday loans are obviously an option and whether you should take it or not should be decided only after checking out all the pros and cons.