The Ins and Outs of Payday Advance LoansA payday advance loan can be a blessing when you find yourself in a tight spot. However, these types of loans should not be used for a long term solution, as they have several drawbacks. If you are considering using a short term cash advance loan product to help you out in an emergency or when your paycheck is short, it is wise to arm yourself with all the information you can find before borrowing these funds.
Payday loans offer several benefits that other financial products cannot provide. The first, and most attractive benefit, is the quickness with which you can access your funds. When you apply for a payday loan in person at your local lender's office, you can usually have the cash in your hand within about 30 minutes, including the time it takes to complete the application. If you apply online, the funds will be deposited to your bank account within one business day.
Payday loans are also easy to access. If you are over the age of 18, have a valid photo ID, a regular job or other source of income, and a checking or savings account in your name, you can get a payday loan. You also usually don't have to submit to a credit check. This makes payday loans attractive to just about everyone, but especially those consumers who have credit that is less than perfect.
There are a couple of things that deter many borrowers from using a payday loan. The main negative aspect of a payday loan is the high interest rate. These loans are meant to be paid back within 14 to 30 days, and as such, carry extremely high interest rates. While these loans are regulated by each individual state, lenders are allowed to charge anywhere between 100% and 500% interest on these loans. These rates make them the most costly forms of loans or short-term cash assistance.
Another detriment of payday loans is the never ending cycle that a borrower can find themselves in. It is easy to take a loan with the intention of paying it off and moving on when you get paid again. When payday comes, you may be short on cash when you find yourself paying back the loan plus administrative fees and interest. So, you take another loan to cover the first. The loans snowball out of control, and before you know it, your entire paycheck is eaten up by repaying your payday loans.
Payday loans are good if you are in need of very short-term financial assistance. Emergencies and accounting errors usually can't be prevented or predicted. However, it is important to borrow responsibly and only take a payday loan or cash advance loan when there is absolutely no other choice. You should also take care of your credit and build your credit score so that you will have other options, such as zero percent interest credit cards or low interest bank loans, available to you should you need emergency funds.