Since the dawn of the Internet age the payday lending industry has witnessed phenomenal growth. More and more people these days go online to borrow cash when a sudden unanticipated expense arises. Thousands of payday lenders flock the online space in-order to grab their share of customers by offering instant loans to people who are in need of urgent money. Yet with all the benefits that payday loans and its services offer it is still a matter of debate for many. This article discusses some of the advantages and disadvantages of a payday loan.
Time bound loans
Traditional lenders have a hectic application process before the loan gets its final approval. So getting a loan on time to meet a short term emergency from a traditional lender never works well. However, payday loans have a simple application process and easy access to funds without any paper work to fax-in. This is one of the vital reasons that make payday loans a hit and poses it as a better option to consider at desperate times. Payday loans are quick, easy and hassle free to borrow when unexpected expenses crop-up.
Works on high interest rates
In-spite of the major advantage stated above most critics accuses payday lending of exploiting the lower income range communities that it targets. The high interest rates at which the loans are offered have always been a matter of serious concern to many. When the doors of high street lenders are shut completely for people with bad credit, payday loans offered by payday lenders help those who fall short of money to meet their urgent expenses. Simply put payday loans are for all but predominantly preferred and used by the under-banked customers in UK. Since the payday lender provides an unsecured loan to the under-banked, the risk of loan defaulters are quiet high and this risk factor determines the high interest rate of a payday loan. If a borrower plans to repay loan before the completion of the installment period then there are chances that it lessens the interest rate.
Not for all reasons
A typical usage of a borrowed payday loan is to tackle unexpected expenses. Well you could have thousands of reasons for the sudden monthly shortage. But if you are borrowing the loan to pay off another then it is time for you to assess your financial damage. Rolling over or extending is also not advisable because you tend to make it a habit and never get out of debts. Early repayments help improve your credit rating.
Never skip payments
A payday loan normally works from paycheck to paycheck. However some of the lenders provide monthly installments too. Whatever be the situation never skip payments, if you are aware of the fact that you won’t be able to pay for the coming month then call-up to inform your payday lender. This helps avoid the occurrence of late fee and other charges. A prior notice to the payday lender will signal your intent to repay the loan in full. And this helps avoid all kinds of trouble that usually arise due to non-payment.