The Good And Bad Of Payday Loans

Payday loans are short-term cash advances that special lenders issue to needy consumers. Fast cash lenders will usually issue quick loans that range from $100 to $2,000. These types of products are extremely popular for several reasons.

The Popularity of Payday Advances

One reason for the rising popularity of these short-term advances is the amazing processing speed. Lenders can verify an applicant's information, make a decision, and disburse funds to the borrower within 24 hours. In some cases, the lender can issue the funds within 15 minutes. This speedy delivery is very desirable among consumers.

Payday lenders process applications without considering the applicant's credit rating. Therefore, an individual with bad credit and poor payment history can very easily have access to quick funds. The lack of a credit check is also very popular among consumers.

The only criteria the consumer must meet to qualify for an advance is to have a steady job and a valid bank account. His or her income must also be within an acceptable range. Most payday lenders like to see a monthly income of at least $1,000 before they will approve an application. The consumer must have a valid bank account so the lender can disburse and withdraw funds.

Uses for a Fast Cash Advance

A consumer can use the funds from an advance for a number of reasons. He or she can use the money to pay an overdue utility bill. That person can also use the funds for automobile or computer repairs. Additionally, the individual can use the proceeds for grocery shopping, dining, lodging or school supplies. The lenders have no stipulations on how the consumer uses the loan. However, it is important that a consumer only use this type of loan if it is necessary.

The Cons of Payday Loans

Just as there are attractive features of payday advances, there are also some unattractive features. First, the loan life for these types of advances does not normally last more than 30 days. The average lender will expect repayment from the borrower within 14 days, or when he or she receives his or her next paycheck. If the consumer has a problem making payment, some lenders will extend the repayment date. However, the debtor will most likely have to pay extra finance charges for the extra time.

The interest rate for a traditional payday advance is usually between 390 percent and 600 percent. Consumers will have to pay a high price for the convenience of obtaining fast cash. For example, a debtor will have to pay approximately $15-$25 just to borrow $100 for seven to 14 days. If the debtor happens to enter an agreement with a more flexible lender that offers extended repayment options, the costs could multiply.

Making the Choice

Lenders make payday advances very costly. However, when a consumer needs immediately cash, a quick advance can solve the problem. Before a consumer makes a decision to apply for a quick cash advance, he or she should consider several things. First, the individual must make sure that he or she can repay the loan plus the interest in a timely fashion. The consumer should then conduct research and find a reputable company. Finally, he or she should ask himself or herself if the loan is crucial.

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