Why Should You Make Use of a Pay Day Loan
| Date Added: September 09, 2011 04:09:59 AM |
| Author: MJSumner |
| Category: Computers & Internet : Blogs : Finance |
| Payday loans are frequently touted as a rapid fix for a bad financial situation, letting you get through the time between running out of money and your next wage or salary. Basically, you can borrow a small amount of money for a short period of up to two weeks or so, and repay the debt next time you get paid. This sort of service can indeed be quite handy if you've got no cash for living expenses, or if you're faced with an unforeseen bill or expense that you simply can't cover when you need to, but are payday loans always the easy way out they're described as? To start with, we'll take a look at the indisputable advantages of pay day loans, before looking at the disadvantages, and possible alternative options you may be able to use if you decide a fast cash loan isn't the right option for you. The lending standards for payday loans are very generous indeed, and almost anyone who's working and has a suitable bank account will in all likelihood be accepted. This means that even people with poor credit histories should be able to make use of a payday loan, despite being turned down for nearly any other type of finance. They are also easy to arrange, and you can frequently get the funds in your account in a matter of days. Some payday loan companies can even set up an overnight transfer of the loan straight into your bank account the next working day, which is patently really useful when you need money urgently. Finally, once you've been accepted for your initial loan, it's usually a very easy matter to 'refresh' your loan again if you find you need to make use of the facility if money is again short in the future. There are, however, two large disadvantages to payday loans which you seldom read in the advertizements and web sites promoting them. Firstly, they're really pricy compared to other types of credit. Because the borrowing period of the loan is so small, a fee of 20% of the amount you borrow - which is more or less standard - will work out to be an amazingly high APR. The second problem is often a result of the first: because they're so pricey, you can easily be left without enough funds the following month once you've cleared the loan and paid the interest. In this scenario, it's just too easy to roll over your loan again to cover the deficit, resulting in more interest, and a permanent cycle of debt. Therefore, if you decide that a payday loan isn't the right option for you, what choices do you have? The first one is using a credit card, if you have one. While credit cards are usually also pretty pricey forms of credit, they do allow you to spread the debt over a a period of months rather than requiring it to be paid back straight away along with a fee. Many bank accounts now feature an overdraft facility, which can also be used to cover a short term lack of money. The interest rate on an agreed overdraft is likely to be more favourable than that of a credit card, but your bank might not approve your application. Be careful about going ahead and overdrawing without your bank's agreement, as the charges they will impose in this case will be very expensive. If neither of these options is viable for you, and you have no other way of acquiring money such as borrowing off family, then a payday loan may be the best option. Just ensure that you use it properly, and paying attention to the warning it's giving you about the longer term condition of your financial life. |
