Over recent years we’ve seen a tremendous increase in what are known as ‘payday’ loans .Payday loans are generally loans to individuals who have been declined funding by high street banks. They offer borrowers the option of obtaining small, unsecured cash advances, and can be obtained even when an applicant has a history of bad credit.
Payday loans are taken out for many reasons: in order to pay for medical expenses, to replace faulty appliances, for urgent car repairs and so on. When money is needed right away, payday loans throw people a life rope, albeit an expensive one, and allow them to get over a financial hurdle.
What are the advantages of payday loans?
Payday loans are usually for short term advances of $1000 to $5000. The application process is usually straightforward – and can often be completed via the internet. This is an attractive option to borrowers, since the application process can be carried out without having to head to the bank, waiting for approval for the loan. Approval for payday loans often happens in just a few minutes, with release of the loan amount following close by via wire transfer.
When it comes to applying for a payday loan, there’s no need to worry about having a good credit rating. The important thing is that you have a guaranteed monthly income and a bank account. If that’s the case, a payday loan company will generally regard you as a safe bet to lend to. Taking out a payday loancan even improve your credit rating –so long as you repay the loan on time. Each time you repay a loan this information is passed to the main credit reference bureaux, and this can begin to build you a better credit profile.
The disadvantages of payday loans
There are many well-publicised disadvantages to payday loans. They charge a great deal of interest, which is why some governments regulate payday loan providers by setting the amounts they can lend and by capping interest rates.
It’s fair to say that payday loans impact on vulnerable members of society, and lenders tend to make their money from the lowest earners. If you are considering taking out a payday loan, it’s essential to make sure you can afford the hefty repayments. Otherwise you can quickly get into trouble if you fall behind, since debts, fees and interest can rise very sharply in a very short period of time.
But if your options are extremely limited, and you are certain you can repay the loan on time–getting a payday loan online is in many ways similar in terms of expense of bank overdraft fees. Check your lender is licensed with the ASIC Professional Register before taking out a loan.