When it comes to choosing a solution to money shortages, some people will hesitate to get a payday loan. But in truth these loans are the ideal answer for those of us in need of fast cash.
Of course, like any other loan option, there are risks involved, and statistically they are amongst the most expensive loans in terms of interest rates charged. However, there are several advantages to loans approved ahead of payday as opposed to those that are repaid over a longer period of time.
Life can throw up some unexpected and rather unwelcome situations, some of which can demand immediate payment. Medical emergencies, for example, can demand a significant payment almost immediately, and accessing the necessary cash is not easy for many of us. A payday loan can ensure that the funds are made available to meet this demand.
Loans approved ahead of payday are generally only as high as $1,500, so as to allow for the monthly pay check. After all, it has to cover the loan principal and interest - perhaps bringing the total repayment to $1,750. But crucially, they can provide funds that might otherwise be delayed by as much as 3 weeks.
High Interest, Low Payments
It has been argued that the rate of interest that these cash advance loans charge are very high. This is certainly true, with some lenders charging as high as 15%. However, the fact remains the amount of interest paid over the lifetime of the loan is minute compared to regular 12 or 24 month loans.
This is because, whereas the alternatives will see 12 individual payments per year, the payday loan has just one or two months. The actual amount paid in interest is low, maybe $200. And given any emergency, that may be acceptable.
Certain Access to Cash Fast
Applications for loans against the weekly pay check are rarely, if ever, rejected and are also issued quite quickly. The reasons for this are two-fold: firstly, the pay check is security; and secondly, the cash sum is usually small.
The fact is that loans approved ahead of payday are limited by lenders, ranging from $100 to $1,500. So long as the confirmed monthly salary is sufficient to cover the amount, there is little reason to turn the application down. Cash advance loans are as reliable, therefore, as a borrower could hope for.
Applying for this kind of loan is very simple, requiring less of the paperwork than regular loans generally do. There is no need to provide collateral and no need to show credit history.
Lenders providing payday loans really only care about the pay check, which means that proof of employment and confirmation of the monthly income is necessary, while a bank account from which to withdraw the repayment automatically is also necessary.
Once these three factors are provided, proving that repayment is possible, it is logical to see these loans approved ahead of payday.
No Credit Checks
Finally, lenders who specialize in cash advance loans do not waste time in checking the credit ratings of their applicants. The reason is the same as above, with the monthly pay check the only thing that really matters.
This means that payday loans are perfect for those likely to be rejected by banks, and provides an opportunity to improve their credit rating each time a loan is repaid.