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Thanks to high-speed internet and instant online services, getting a loan is easier than it was 20 years ago. As is the case with any service, payday loans come with their own set of plus and minus points. The trick lies in knowing when such a loan would be useful.
Before explaining when a payday loan would be useful to you, it is important to understand when not to apply for one. Here are some situations where such instant loans may not be the best option:
- You have already availed a loan which you are in the process of repaying. Avoid applying for a second loan to pay off the first; This is usually the start of a vicious cycle of debt.
- You need the loan for impulsive spending or spending on luxuries or non-essential items; If you want to buy that expensive perfume, hold off until you have enough money to do so. The same goes for shopping for the holidays, gifts, and clothes.
- Your income is low. Keep in mind that fast loans are usually expensive. Interest rates are exorbitant. If you earn a low income, this may not be for you. Instead ask your bank or financial advisor for help
Some of the benefits of payday loans are:
- They are quick, easy and hassle-free to avail: If you have a loved one in the hospital and you need airfare urgently, payday loans are a great option. Approval is often within hours and you can get cash almost immediately
- They are an excellent option if you need money urgently on a weekend or public holiday. Since the internet operates 24 x 7, payday loans are always accessible including nights and weekends
- If you have a bad credit history, there are some lending companies that will be happy to extend credit to you. It is important to note that the price of loans given despite bad credit can be (and often are) high. Interest rates can be high. But in case of serious emergency the option is available
- The application process is simple. The forms usually ask for your name, contact, age (you must be over 18), employment details, salary earned, etc. You may need to scan your ID, bank account details and employment certificates.
- You can apply for a payday loan from the comfort and privacy of your home. No need to run after banks and other lending institutions.
To avail payday loans, you must keep the following precautions in mind:
- Be sure you are aware of state laws governing interest rates. Each US state has different laws when it comes to capping high interest rates. If you find a lender asking too much, you can report them to the Consumer Bureau
- Apply for instant loans only when you are severely strapped for cash. Remember, payday loans don’t come free. Sit down and analyze whether the situation really warrants applying for a payday loan
- Before applying, do the calculations and see if you can handle the repayment schedule. If you miss the repayment deadline, you may end up paying double or triple the interest rate. The company will then offer to rollover your loan but it will not disappear. You can pay interest rates of up to 400% per annum.
- Compare and check if your credit card company can help you with a loan instead of a payday lender
Payday loans fit the bill when:
– The emergency is urgent and pressing
– You can repay the principal and interest amount without sitting in a corner
The trick is to pay off your debt and wipe it off your slate forever. Avoid paying off the loan or delaying the repayment.
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