Payday loans are short-term loans people apply for if they have instant cash needs to cover. The loan amount limits are usually small, about $500 or less. Payday loans also come with higher interest rates than most forms of borrowing. Borrowers are also required to repay the loan by the next payday. The benefits of payday loans are difficult for some people to identify immediately. This could be because short-term credit is not necessarily ideal for everyone.
A short-term loan is usually the ideal option when you need money for an emergency or any other immediate use. Generally, loans should never be regarded as regular borrowing or even income. Should you choose to get a payday loan, or any other type of loan, make sure that you know precisely when and how you will back the loan.
However, even with these considerations, there are several benefits associated with payday loans, making them quite useful in some instances. Here are the top 8 benefits of payday loans:
1. You Can Get the Loan with Bad Credit
Ordinarily, it is difficult to get a conventional loan if you have a poor credit history. Most lenders or financial institutions reject high-risk loan applications. Poor credit history is a sign that you are not good at paying back loans. Most traditional consumer finance providers are not willing to offer credit to someone with bad credit. You may also struggle to borrow money if you do not have any credit history at all.
The good news is that you can get a payday loan with a poor credit history. Although most payday companies carry out extensive affordability checks on all applicants, they still give out payday loans to people with bad credit. The lenders compensate for the high risk by charging higher interest rates than most lenders. That is why they can easily accept loan applications that other lenders will not consider.
2. It is an Unsecured Loan
Besides getting approved with a poor credit history, you also don’t need to provide asset security to get a payday loan. Some lenders or financial institutions require borrowers to provide security in the form of their home, car, or valuable assets in case they cannot repay a loan. However, with a payday loan, lenders offer unsecured borrowing, meaning there is no need for you to put your personal property at risk.
3. Simple Application Process
The application process for a payday loan is relatively simple. In most cases, people apply for a loan online. Only in exceptional cases will the lender require you to bring additional forms of evidence. However, you can always go directly to the lender to apply if you wish to do so. All that is usually required is to complete an online form, providing your financial and personal details.
Once you send in your application, the payday lender will process it quickly. The loan is usually approved instantly, and you will receive the funds immediately as cash or a check. Alternatively, the money is deposited into your bank account, and it should reflect in your account within 24 to 48 hours.
4. Simple to Manage
Most borrowers prefer to apply for a payday loan online because it allows them to manage their borrowing quickly and conveniently. When people apply for this type of loan online, they are usually given access to a personal online account. When you make an application, all you have to do is log in to check details such as your current loan balance and repayment dates. Managing your loan online also makes making early repayments easy if you wish to do so.
5. Instant Cash for Emergencies
The unfortunate part about emergencies is that they cannot wait. Emergencies need to be attended to as soon as possible. If you need money fast, but you have run out of where to get instant cash, a payday loan may be your only option. In emergencies, waiting for a traditional loan to be approved might not be an option because conventional forms of borrowing take time to get approved. Sometimes family and friends may not be readily available to assist you when you need money quickly. A payday loan will enable you to sort out that emergency quickly.
6. Few Requirements
Applying for a payday loan online is relatively easy because payday lenders usually ask for only a few standard requirements. The critical condition is a constant source of income (proof of income). As long as your bank statement shows that you receive a regular cash flow, chances of you finding a willing lender are very high. Besides having a working and active bank account that gets a steady cash flow, they require you to furnish a copy of your government-issued ID to show that you are 18 years or older.
7. There Is a 14-Day Cooling-Off Period
When your application for a payday loan is approved, you will be entitled to a 14-day cooling-off period. This provision allows you to cancel the loan agreement within 14 days should you change your mind. If you decide to cancel the loan, the lender will require you to pay back the loan amount plus any accrued interest. However, you will be refunded for any fees or charges you have paid by the lender.
8. Helps to Limit Your Debt
With a payday loan, the amount you can borrow is determined by your income. Payday lenders set a limited amount you can borrow automatically, and this helps borrowers avoid being stuck in a debt cycle. The idea is to make sure that borrowers only borrow amounts they can afford to repay on time. Unfortunately, some borrowers apply for loan amounts beyond their means. These borrowers often struggle to pay their loans, and they are buried in a cycle of debt. You must avoid such impulses if you opt for a payday loan.
Although payday loans are often associated with negative feedback, they also have their set of benefits. Any loan type can affect you negatively if it is not managed correctly. Whether you apply for a payday loan or some other kind of loan, how you manage that loan will determine whether it benefits you. If you handle a payday loan well, it will not negatively affect you. Instead, you can benefit immensely from a payday loan when you need funds quickly.