Payday loans have been created to help people out in a financial emergency, but only on the short term. You pay the loan back on your next payday, interest and all. The majority of payday advance loans are found online nowadays, and you only have to fill in a quick form to find out whether you have been accepted. If successful, you could have the money in your account in a matter of hours.
Requirements to Apply for a Payday Loan
There are very few requirements to apply for a payday loan. Generally, lenders only ask:
· That you are at least 18 years old (21 in some states).
· That you are employed and paid regularly directly into a bank account.
· That you have a valid and active bank account.
· That you are a legal and permanent resident of the United States.
In most cases, a credit check is not required. These loans are designed to help people out of a difficult situation and to do so quickly. Hence, the guarantee for the lender is that you pay it back the moment your next salary is deposited in your account.
Pros of Payday Loans
· They are available to pretty much everybody, even with bad credit.
· They are very easy to apply for. It takes just a few minutes to complete your application and you could have the money in your account within hours.
· The amounts are small, which means that you don’t end up tied in huge amounts of debt.
· You pay them back at your next payday, which means that you don’t have to shoulder debt for a long time.
· You can spend the money anyway you like.
Cons of Payday Loans
· They have incredibly high APRs, which means you pay back a lot more than what you borrowed.
· They can be rolled over very easily. This means that you only pay the interest at your first payday, and you will pay an extra month interest plus the principal at the next payday. This may sound like a benefit, but it is made so very easy that people often roll the loan over again and again, paying noting but huge amounts of interest.
· If you can’t pay your payday loan, you will be in a whole lot of trouble. Many people can’t pay it back, because it takes too big of a chunk out of their disposable income. It is also for this reason that they have been made illegal in many states.
So should you apply for a payday loan, or are they a bad idea? The reality is that, as with all financial products, there are significant pros and cons, and only you can decide which ones weigh heavier. If you are responsible with your money and have budgeted your income properly but are simply faced with an unexpected financial emergency, then payday loans are excellent products. However, you do have to be committed to paying it back as soon as possible.