The Good, the Bad, and the Ugly Side of Payday Loans
Whether we like it or not, payday loans are a reflection of what is happening to our society today. These loans have been criticized ad nauseam — but are they really all bad? Let’s take a look at the arguments in favor of Payday Loans:
These loans are available for unforeseen emergency situations when you desperately need quick cash. Situations where people seek payday loans include unexpected medical bills, car repair bills, unexpected travel, or a death in the family.
The benefits of payday loans:
- There is no credit check involved.
- Payday loans, or cash advances, are extremely fast.
- The application process usually takes only a few minutes, consisting of simple fill in fields including your bank account information.
- Applications can be made in person, on the phone or on the Internet.
- The process takes less than 20 minutes.
- After submitting the application, the approval process begins, and is usually instant or only takes a few seconds.
- The majority of applicants are approved instantly and collect get their cash within hours.
- The loan amount is automatically deposited into your bank account within 24 hours.
- No up-front costs are involved.
- You don’t need to involve other people (discreet).
- Your financial information is not shared with others.
- Personal payday loans are available to almost everyone.
- Bad credit does not disqualify you.
If Payday Loans are so wonderful, what’s the problem? Why the fuss? These are the disadvantages of payday loans:
- Payday Loans come with a huge price tag that the borrowers usually cannot afford.
- Usually, borrowers pay roughly 15 dollars for every 100 dollars borrowed for two weeks (these costs can vary).
- Broken down annually, the APR is staggering - at times going over 500%.
- If payday loans are targeted at cash-strapped individuals, there is a
strong chance that you may not be able to repay the loan with your next
paycheck. This can catapult you into a “rollover” situation where you
keep renewing or extending the loan and end up paying a huge interest
to the lender — an interest that you cannot afford.
Those were both sides of the payday loan argument. Which side you take
depends on your immediate situation. Maybe you’ll be thankful for it
when you are desperately cash-strapped; and you’ll hate it when you are
paying back the entire amount (including the interest) to the lender?