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What Are Payday Loans?
Payday loans are small cash advances given by direct loan lenders to borrowers who either need fast cash solutions or are unable to get accepted by other lenders. However, some people do consider them to be a step closer to getting into a debt trap and here’s why:
1) Payday loans are more expensive than regular loans which is why those who can’t afford them consider them to be bad, even though they come with many benefits that other loans do not.
2) The next fact about why they may be hard to repay is that they are meant to be repaid on a borrower’s next pay date. That means that they have to be repaid in lump-sum and not in installments which can be hard on the pocket.
What Are The Benefits of Taking a Payday Loan?
Even though they may have a bad name, they are popular. Why is that the case?
1) They are quick funding solutions: When you need money quickly in order to address an emergency, you can’t rely on traditional loans since they come with many conditions which payday loans don’t. The approval process of a payday loan is way easier and quick than that of a traditional loan. So, instead of waiting to be approved for days by a traditional lender, a lot of people choose to apply for a payday loan instead which they typically receive within 24 hours.
2) They are given for bad credit: Yes, that’s correct. Payday loan lenders do not rely on credit checks in order to fund their borrowers. Instead, they depend on one’s current financial situation which can be proven to be stable by providing their current income statement. If their income statement proves to be a stable one, they shall most likely get funded by their direct loan lender even if they have no credit rating or a bad one.
3) Online applications: You can always choose to apply for a payday loan online itself which means that you get to save travel time, travel cost and also apply at a time that’s most comfortable for you. You do not have to specially take out time from your busy schedule in order to apply for a loan and neither do you have to miss work or other important chores which means that you don’t miss out on that day’s salary either.
4) No collateral: That’s right! When you choose to take a payday loan, you don’t have to worry about having to offer collateral to your direct lender. That’s because, processing collateral takes quite a long while with all the paperwork that’s involved which defeats the purpose of providing funds instantly to you. Also, for a small sum of money your direct lender shall not expect you to either have collateral to put up at stake or to provide it.
How Can One Avoid Getting Into a Debt Trap With a Payday Loan?
In order to receive the best of both worlds in terms of getting a fast cash advance that too with a bad credit rating, here is what you can do in order to avoid getting into a debt trap when you take a payday loan:
• Borrow only and only as much as you can repay. Take into consideration your other monthly expenses as well as the amount of the loan plus the interest, calculate it and borrow accordingly.
• If for some reason you think that repaying your loan on the due date may be difficult, ask your lender for a rollover or an extension.
• Apply only with legitimate lenders who have their rates displayed on their websites and not with those who aren’t transparent about their rates since if they later on go ahead and quote a price that you can’t repay, it can make a mess out of your finance related plans.