A standard payday loan differs greatly from credit loans. While both have the same purpose, to provide you with money that you eventually pay back with interests, credit loans have a much longer payback period than payday loans. People actually often make the mistake of raising a long-term credit loan when they just need a quick cash boost for paying bills. This just generates additional unnecessary debt in the form of long-term interest rates, which can last from a period of a few months to several years, depending on the length of the payback period in the loan contract. Or to put it in simpler terms: you lose money without any valid reason. A payday loan is different because it has no long-term interests. Payday loans are short-term loans, with their name quite accurately describing their purpose. You can get payday loans at any time, but as all things, they have both advantages and drawbacks. So we’ll be dealing with those aspects next, first the advantages and then the drawbacks.
Can a payday loan have advantages?
A standard payday loan can be advantages because it is quick, and you are not hit with long-term extortionate interest fees. Most people can get some sort of loan at any time, whether it’s a payday or credit loan. Each type has its own purpose and conditions that need to be regarded before getting a certain loan type. We’ve already said that payday loans are short-term, while credit loans are mostly long-term. So we’ll elaborate a bit more on that. For instance, if you want to buy a house or a car, you’ll want to get a credit loan if you don’t have enough cash for an up-front payment. Why a credit loan? Well, simply because houses or cars are quite expensive. If you buy a $10,000 house, it would be quite difficulty to pay back that amount of money in a period of a few months. Instead, a credit loan enables you to pay back that amount of money through a period of several years if necessary.
How much extra will payday loan cost me?
Payday loans are actually charged on your next paycheck. Payday loan businesses obviously have to make some profit, but this is legally regulated so you won’t fall into scams dealing with payday loans so easily. Typically, for a $100 loan, you are charged an extra $15 on your next paycheck. So for an instant $100, you actually pay $115 on your next paycheck. You should only use payday loans when you really need them, although that is true for basically any type of loan. While advance payday loans can help you with paying some overdue bills or unexpected expenses, you should not rely on them too much because the extra loan charges add up pretty quickly.
The drawbacks and potential risks of a payday loan
As mentioned earlier – a payday loan is only viable as a short-term quick-fix solution for paying relatively minor unexpected expenses such as car malfunctions, smaller medical or generally overdue bills. You can get payday loans anytime since their loan requirements aren’t as rigid as for credit loans. Payday loans don’t take your credit rating into account, just your average monthly income. While this is an advantage, it is also a drawback in a way. You can never raise larger payday loans than what you earn monthly, with certain businesses dealing with payday loans even having percentile limitations for them. For instance, some may only allow you to raise payday loans that equal to 30 percent of your monthly income. Sometimes you need a bit more than that, unfortunately. On the other side, those kinds of limitations are also failsafe measures to prevent people from overextending themselves and spending their entire paychecks on loans. In any case, payday loans are quite valuable when you need a quick cash boost to last you through the month.
If you are one of those people facing bad credit financial history, then no faxing cash advance is a fast manner of obtaining loan when you need it. This category of borrowers face problems related to take up a loan, because banks and other financial institutions are reluctant to granting loans to this category of clients or the loans are granted with extremely high interest rates. However, people finding themselves in state when they are desperate for money should be careful about where do they get such extra money.