What Should You Know Before Taking Payday Loan?
There are various loans used for the short term, high interest loans and Payday Loans are one of them. Other terms used are cash advance loans, deferred deposit loans and so on. There are various sources offering the payday loan both online and offline. All you need to do is to fill them with some personal and financial information while requesting the loan.
Anyone who has a steady source of income can use the payday loan option. Borrowers who are not eligible to get the loan from the banks or do not have saving accounts usually prefer payday loans. Some of the common characteristics that the payday loan borrowers have exhibited lately are
- Lack of a college degree
- Earn less income on which banks do not sanction a loan
- Divorced or separated
- Urgent cash requirement
Benefits of Payday Loans
Credit history does not matter – Almost all the banks require your credit history before offering you the loan. Those who do not have good credit history are not eligible for the loans. Well, credit histories are a difficult thing to maintain because sometimes you might have noticed that even though you have not defaulted on any loan and paying your installments, credit history is not as rosy as you were expecting it to be. Payday loans do not take into consideration the credit history. You can get the loan quickly just by giving a few information.
Higher Amount – Based on your credit history and annual income, the banks would set a limit on loan that you can avail from them. However, payday loan offering companies often consider increasing the amount of the next payday loan if you have paid the first one in time. For instance, if you have applied for $1000 and paid on time, the lender might increase the loan limit to $1500 next time when you want.
Quick and Convenient – Most of the payday loan companies have now moved their business online and therefore you need not to worry about all the paperwork and carry bulky files with you. All you need to do is to fill out the form, give personal and financial details to get the loan processed and money to reach your account. Also, with the payday loan, there is no restriction on the purpose of the loan as with the banks wherein say if you have taken the car loan then it can only be spent on buying a car. With a payday loan, you can settle down any emergency.
High Interest rate – Be prepared to pay extremely high interest rate on the payday loans. These loans are short term, unsecured loans and therefore the interest component is quite high.
Direct Debit – Before getting the payday loan, you need to sign the agreement for direct debit from the account as and when you get the funds. Make sure that you are aware of this clause beforehand and not just sign the agreement.
Debt Trap – In case you could not pay the loan, you would want to take debt from another lender to pay the first one therefore finding yourself stuck in a debt trap.