The cost of living has been going up every day. Most of the people in the society are currently living paycheck to paycheck. When an emergency expense comes up, these consumers panic because they do not have extra incomes to deal with the situation. For people who have an emergency fund, things will be easier. However, if you are not in a position to save money, these unexpected times will be stressful.
Should consumers rely on short-term loans when in emergency?
Experts in the financial market say that people should only get the paycheck loans when they do not have any other options. Everyone wants easy access to funds, but the loans should not be misused.
A paycheck loan needs a ninety days repayment period. Some lenders will request for the loan to be cleared in the next payday. Because the loans are paid to the no credit check lenders quickly, they will mostly be given to customers in small amounts.
What are you supposed to do?
Short terms loans, popularly known as payday loans come in handy during these trying times. To many people, these types of loans offer the perfect solution. Short term loans are easy to access because they are approved and transferred to your account in few hours. It is crucial to note, however, that there are important features to consider when getting a payday loan.
What are the Pros payday loans?
Payday loans have their benefits to consumers. Here are a few of them:
- First of all, they will give consumers the financial flexibility they are looking for. The greatest beneficiaries of the loans are the people who live paycheck to paycheck.
- When the loan has been reviewed and approved, the funds are deposited to the client bank account. This means that the customer will have instant access, and the customers can use the funds the way they want.
- Short term loans are very flexible. Moreover, there are online lending services that allow consumers to apply for emergency loans day and night. You do not need to go to any bank to access payday loans. There are no specific working hours too. The online lenders do not require an office, making things better.
- As you are repaying your loan for the duration you are given, you will be rebuilding your credit history with the lender. In the future, the lender will most likely give you bigger and better loans.
- Although it is not advisable to rely on this emergency service, it will give you peace of mind to know that you can get cash whenever you are in need.
The Cons of short-term cash loans
Short term loans have their disadvantage too. Here are the most common.
- According to financial experts in the world, these are considered to be the most expensive debts that a consumer can carry. Payday loans are sometimes more expensive compared to having a balance on the credit card.
- The interest rates that are charged on the loans are very high. In fact, they are higher than the ordinary loans given by private lenders and banks. A study shows that they have an upward of 400% APR. This means that for every $100 you will be borrowing, you will be charged $15-30.
- If you are not able to pay your loan in time, you will most probably be hit by hefty charges. The lenders will expect you to pay the loan in a short duration, and this means that you should consider the option you are confident of your ability to pay back all the money in your next paycheck. You shouldn’t have any other cash advance option when choosing the payday loans.
- Just like all the other ordinary loans available in the market, you should be ready to have your credit history checked. If you do not make the payments at the right time, your credit will be seriously affected.
What every borrower should know
Payday loans are generally considered to be dangerous. Financial experts say that these are predatory financial products that should be considered as the last option. Just recently, Google announced that it had banned all the payday loan ads there were being shown to consumers. According to Google studies, the short-term loans result to very high default rates and unaffordable payments for the users.
In most cases, the people who ask for the short term loan are those who currently can’t access credit or saving accounts. When an individual does not have savings and good credit, they will most likely have no income or financial ability to pay the loan they acquired in time. The cycle of expensive debts keeps recurring, making the borrowers forever indebted. At the end of the day, these consumers will never be financially stable.
Should you take the short-term loan?
Consider this type of loan if you meet the following qualifications:
- Have a great credit
- Are confident that you will have the money to pay the loan as soon as possible
- Are not worried about paying high-interest rates
If you are able to take a personal loan to cover your expenses, it is paramount to avoid applying for payday loans. If you get the personal loan, you will be fortunate to enjoy better fees, low-interest rates, and longer repayment duration. You will have avoided getting caught in the cycle of debts and borrowing. Moreover, the modern market has presented numerous options for consumers so that they can prevent the short-term loans.