Many don’t think about their credit reports or credit scores in their early twenties. It is often hard for young adults to qualify for a starter credit card and other credit-building opportunities without the approval and support of parents or someone who can consign the documents with them. Therefore, many young adults seek a short-term credit solution that may help them to cover their temporary expenses that should be addressed nevertheless.
At the same time, customers need to have financial literacy and avoid abusing the short-term credit solutions that can worsen their overall financial situation. One may argue that it is even beneficial to learn some lessons in a hard way early on in life. Still, it is better to stay away from the unpleasant consequences of one’s overspending and lack of knowledge regarding accessible methods of short-term loans.
The most common method of covering the emergency expenses is payday loan companies, whose services are quite easy to find and where the loan application process takes several minutes to complete. Indeed, they are the subject of both criticism and praise due to their complex nature. They promise and provide quick cash that you might need at the moment while simultaneously having sky-high interest rates. You may win in the situation or fall into a never-ending cycle of loan debt. So, it is important to evaluate all pros and cons before getting involved in a loan to solve your financial emergency.
Pro: Quick money without a credit history check
Numerous lenders review your credit history when deciding to provide you with borrowings. The credit scores may vary, and if your credit history doesn’t meet the criteria, your request will be declined. On the other hand, many other providers don’t check your credit history before giving you a loan, but you might face other application problems.
Payday loans are designed to provide you with an immediate solution without the necessary check on your credit score. Sometimes the process is automated. You don’t have to answer the questions or meet in person with a lender to be approved for a loan. Some lenders, like paydayinusa.com respond to you within the same day as you have uploaded the necessary documents for the procedure. This option is helpful when you have no other way to cover emergency expenses and you need the borrowing.
Con: High-interest rates
It is essential to understand that payday loans are the quickest way to cover the gap in your budget and a short-term loan type that involves high-interest rates for the borrowing. For every $100 borrowed, you have to pay about $15 in interest, and you should keep in mind that you return a bit more than you took. If you are unable to repay the debt within the set deadline, you may also receive additional fees and penalties.
Therefore, the payday loan option is a solution for a person who knows they can return the money without facing the consequences of owing even more than they asked for in the first place. Also, it is important to read the terms and conditions that every company should provide to you. Consider how much fees are associated with your case.
Pro: Convenient online form
It is fair to agree that the transfer of many services in the online domain makes it easier for various people to access everything they need without leaving the house. Many payday loan companies have a convenient online form that doesn’t require any additional fuss. Everything you need is valid documents and a checking bank account that accepts direct deposits. The procedure with online payday loans takes up several minutes, and you are ready to go within 24 hours after the specialists received your request.
The websites also benefit from giving you enough time to read the fine print and investigate the company and its legitness. You can check whether the business is allowed in your state and its registration number on the Consumer Financial Protection Bureau website. Without a rush and pressure of the moment, you can weigh your decision to cooperate with the particular provider and learn all nuances of the deal.
Con: Payday providers offices
Your situation may require having cash immediately. Often, payday providers’ offices are located in far located parts of town, where it is hard for you to get and hard to feel comfortable carrying a lot of cash. Of course, it is better to avoid these situations and contact online providers and then cash out the loan from your bank account. As a matter of your comfort and safety, if you feel anxious when having too much money in your wallet, payday offices may be a thing that should be left behind.
Pro: Unsecured loans don’t require any collateral
Unsecured loans mean that loans are issued only on the basis of your creditworthiness (or without a credit history check, as mentioned before), without having to set your house or car as collateral. Credit cards, student, personal, or payday loans are among unsecured loans. Of course, this type of loan is riskier for lenders. Therefore, they set higher interest rates. However, even if you will be unable to repay it in time, you will not suffer tremendous losses with your property or vehicle.
Con: Fail to repay leads to penalties and debt cycle
Payday loans or any loan in any matter is not an option for you if you have an unstable income or take money for spendings higher than you can afford. When you sign up for a payday loan, you should be confident that you will return this money in time.
The companies may not put you into a stressful position, but you will be constantly reminded about the debt and increasing penalties for each month of exceeding the deadline. Statistically, around one in four payday loans are borrowed more than nine times, which implies that many people are trapped in the cycle due to their inability to plan their finances.