A payday loan is a small loan, typically $500 – $1500, that is accompanied with a high interest rate. People will apply for these types of loans if they need quick cash to cover an unexpected bill such as a car repair, doctor’s bill, or other emergency. In order to qualify for a payday loan you will typically need to have a small monthly income in the neighborhood of $800 and a personal checking account. When you apply for one of these loans you will give the creditor your banking information, and they will deposit the cash directly into your bank account within 24 hours. There are many pros and cons to taking out a payday loan that need to be considered before you apply for one of these short term loans.
Pros
When you are in a pinch for some quick money payday loans can be real asset. The fact that you can have the money direct deposited into your banking account within 24 hours is one of the biggest benefits of payday loans. Since many people take out one of these short term loans when they desperately need quick money, having access to the funds in less than a day is a huge plus. Another benefit of payday loans is that they are fairly easy to get approval. Typically you will just need a personal checking account and a modest monthly income to ensure you will be able to repay the loan. Most payday loans do not require a credit check, making this type of loan perfect for those with a poor credit rating.
Cons
While there are several pros to taking out a payday loan there are many cons as well. One of the biggest drawbacks to using these short term loans to pay for unexpected bills is that they come attached with high interest rates. These high interest rates can make for some rather large monthly payments that some people just cannot afford. Once you miss a monthly payment on one of these payday loans the interest rate usually rises, creating even higher subsequent monthly payments. This snowball affect can really cause some financial problems for some people.
If you are thinking of taking out a short term loan you must consider all of the pros and cons before submitting your application. While payday loans are a great way to receive quick cash directly into your bank account to pay for those unexpected bills, payday loans can also cause some financial problems for those who do not plan ahead and make sure they can afford the monthly payments associated with these high interest, short term loans.
