Payday loans can be defined as short-term unsecured loans that are most frequently used by people to get through a rough patch or financial crises. There are times when a person ends up facing financial crunch but still the list of pending bills doesn’t end. At this point of time in life, one opts for payday loans as they are easy to avail and in very less time. One can find several payday loan providing companies in USA that provide instant cash and with no formalities. However, before opting for cash advances, one needs to understand the cost and risk attached with it.
Payday loans can be used only for temporary purposes like paying pending medical bills, renovation of house, car repair, kids’ school fees and the like. There must be a genuine reason for which one applies for payday loans. There is a proper procedure that every payday loan providing company in USA follows for these short term loans. To get payday loans, the borrower has to issue a paycheck of the same amount, which you are borrowing, in advance. The loan provider would also charge rate of interest on the borrowed amount, which is generally high. Once you give the paycheck to the lender, he gives cash in return. So when the due date arises, the lender deposits the paycheck in bank and the money gets credited in his account.
Companies providing online payday loans in USA with no formalities
However, there are times when a borrower opts for extension of due date. This is because the borrower doesn’t have enough money in his bank account. Extension of due date results in a vicious circle as the debt keeps on increasing and borrower fails to pay it. So it is very essential to know the pros and cons of payday loans before applying for them. In addition to rate of interest, lending companies also charge additional charges for providing instant cash easily. One of the major disadvantages of payday loans is their high cost. Because of high rate of interest and additional fee, these loans do not really help in solving a person’s financial difficulty. Even though money lending companies promise to not charge high interest and pay cash instantly, one must always take wise decision. So it is important for all borrowers to read terms and conditions of money lending companies so that one doesn’t feel duped in the end.
Some of the noted advantages of payday loans are as follows
1. The process to apply for these cash advances is quick as well as easy. A person can apply for them over the internet just by filling a form. Few of the essential documents can be submitted along with the form. After this, the amount gets credited in one’s bank account.
2. One can borrow a small amount as well. Unlike standard banks, short term loan lending companies provide options to borrow as little as $50.
3. It’s just a matter of 15 days maximum. As loan amount is less, a person is allowed to borrow money for maximum 2 weeks and so it is beneficial for people as they get to bear the brunt of loan only for 15 days’ time.
4. The money lending companies are l=most likely to give their nod to the form and provide you the debt. This is because short term money lending companies do not consider bad credit history. So even if you have faced bad credit, you would still get payday loans. However, your reason for applying for these loans must be genuine and relevant.
5. Major money lending firms clearly state the amount of rate of interest and other additional charges beforehand. This makes it easy for borrowers to calculate the amount that would have to be repaid on due date. The companies also do not charge any hidden fee.
While applying for these short term loans, one must find out beforehand if he/she is eligible for it? Money lending companies in USA have a set eligibility criteria which is kept in mind while providing cash advances.
The criteria is written below:
1. The borrower must be at least 18 years of age.
2. The borrower must be earning a fixed income.
3. He/she must have a working bank account.
4. He/she must be employed with an organization for at least six months.
5. The borrower must be a citizen USA to apply for payday loans.
In most cases, people go for payday loans when they face financial difficulty or when unexpected and unforeseen circumstances forces them to borrow money. When it becomes difficult to ask friends or relatives for money, people prefer going for cash advances thinking that they can handle their financial condition on their own and solve it without taking anyone’s assistance. Hence they find payday loans a safer option and perfect substitute.
Costs of payday loans
The average cost of these loans varies from one provider to another. From a broader perspective, it majorly ranges from $15 to $30 for a loan of $100. The rate of interest also depends on the number of days for which one is borrowing money.
So are payday loans good or bad?
Considering the advantages as well as disadvantages of short term unsecured loans, one can say that a borrower must always think before applying for payday loans. This is because getting addicted or habitual of cash advances can prove to be really dangerous. Before applying for them, one can consider alternate options available like taking credit on interest from friends or family members, consulting counselors for assistance and counseling, approaching credit unions that provide loans of small amount on low rate of interest, asking for overdraft from your bank and the like.
So it is not always right to rely on advertisements on TV, radio or newspaper on cash advances. No matter how attractive the ads are or how easy it seems to apply for these loans, it is a risky step as it can land you up in a ever-ending cycle making it difficult to pay back the debt.