{"id":18245,"date":"2022-09-20T22:08:48","date_gmt":"2022-09-20T21:08:48","guid":{"rendered":"https:\/\/businessfinancenews.com\/?p=18245"},"modified":"2022-09-20T22:09:03","modified_gmt":"2022-09-20T21:09:03","slug":"pros-and-cons-of-payday-loans","status":"publish","type":"post","link":"https:\/\/businessfinancenews.com\/loans\/pros-and-cons-of-payday-loans\/","title":{"rendered":"Pros And Cons Of Payday Loans"},"content":{"rendered":"\n
pros and cons of Payday loans are often advertised to borrowers looking for quick and easy access to cash without barriers like a hard credit inquiry. But they also have a reputation for high interest rates and short repayment periods that can keep borrowers in a cycle of debt. Before you jump into a loan, it\u2019s important to weigh the pros and cons of A payday loan is a type of loan that is usually between $100 and $1,500 that must be repaid within two weeks in a lump sum on your next payday. They\u2019re marketed to borrowers who need cash fast since they offer a quick approval process. They also don\u2019t require a hard credit check, which can be attractive for borrowers who have poor or no credit history.<\/p>\n\n\n\n You might need a payday loan if you encounter an unexpected bill or medical emergency that you don\u2019t have cash on hand to pay for. Some other names for Qualifying for a payday loan is much easier than qualifying for a mortgage or even a personal loan. As long as you\u2019re above the age of 18 and you can provide a government-issued ID and proof of income, you\u2019re more than likely eligible for a payday loan.<\/p>\n\n\n\n What makes Payday loans can be a convenient and quick method to obtain cash between paychecks. This appeals to a wide variety of borrowers since Payday loans are known for how accessible and easy they are to obtain. Gone are the days of going in person to the bank or credit union when you can simply do all your banking online\u2014this also applies to An online application process for a payday loan can be useful for those who need cash quickly and easily. A quick search can locate online lenders who are ready and available to borrowers. Many lenders offer online applications that can be completed in 10 minutes or less. Since they don\u2019t require a hard credit check, many borrowers are approved for a payday loan right away.<\/p>\n\n\n\n Since cash advances are easy to apply for, you can get access to money much faster than you would a personal loan, which can take weeks to get approved for. Some borrowers can even get a payday loan within 24 hours of their application.<\/p>\n\n\n\n Requirements for a payday loan typically include being at least 18 years old, showing your SSN, photo ID and proof of income. This makes it easy for borrowers with poor or no credit history to easily obtain a loan.<\/p>\n\n\n\n You don\u2019t need a good credit score to get a payday loan. In fact, lenders don\u2019t pull your credit report, which would normally involve a hard credit inquiry that may drop your score. For those with bad credit or a lack of credit history, this can be an incentive to borrow.<\/p>\n\n\n\n Unlike an auto loan or mortgage, the lender can\u2019t seize your property if you\u2019re unable to pay. However, they can send your debt to collection agencies or take you to court if you don\u2019t pay back your payday loan.<\/p>\n\n\n\n Although Depending on your state, you may have high interest rates on your Other loans like auto loans and mortgages give borrowers ample time to repay their balance. However, the short repayment period of Payday loans are often considered predatory lending. Predatory lending is when a loan is unfair or unaffordable to the borrower, which can trap them in a debt cycle. Some signs of predatory lending include the lender not checking if you\u2019ll be able to pay back the loan and when the loan doesn\u2019t help you build credit.<\/p>\n\n\n\n When the borrower can\u2019t pay back the loan in a lump sum on the due date, they\u2019re forced to roll over the loan to the next billing cycle, like holding a balance on a credit card. When this happens, the lender can collect more interest fees and keep you in debt. If the debt isn\u2019t repaid within 60 days, lenders can send your balance to a collection agency.<\/p>\n\n\n\n One major downside to Payday lenders are most common in communities that predominantly consist of minorities. In fact, there were double the number of payday loan sites in Black or Hispanic communities compared to white communities, according to a 2016 study<\/a>.<\/p>\n\n\n\n Payday lenders also specifically target people of color in their marketing campaigns\u2014over 30 percent<\/a> of payday lenders\u2019 marketing pictures show Hispanic customers, even though they make up less than 20 percent of payday and title loan borrowers.<\/p>\n\n\n\n Oftentimes when you obtain a payday loan, the lender will give you a fast cash advance if you give them access to your bank account. Unfortunately, some payday lenders will try to take the money they\u2019re owed out of your account without your permission. This is possible since they gained access to your bank account to deposit the cash advance in the first place.<\/p>\n\n\n\n Payday lenders can send your debt to collections if you fail to pay your balance for over 60 days. While payday lenders don\u2019t typically sue borrowers themselves, collection agencies can take you to court if you don\u2019t repay your loan.<\/p>\n\n\n\n If the lenders of debt collection agencies are threatening to sue or use wage garnishment to scare you into paying your balance quickly, you can call a local nonprofit or an accredited financial counselor or credit counselor to help you. <\/p>\n\n\n\n<\/a>What are
How do you qualify for a payday loan?<\/strong><\/h2>\n\n\n\n
<\/a>How do
<\/a>Pros of
<\/a>1. Easy application and approval<\/strong><\/h3>\n\n\n\n
<\/a>2. Fast access to cash<\/strong><\/h3>\n\n\n\n
<\/a>3. Fewer requirements than other loans<\/strong><\/h3>\n\n\n\n
<\/a>4. No hard credit inquiry<\/strong><\/h3>\n\n\n\n
<\/a>5. No collateral<\/strong><\/h3>\n\n\n\n
<\/a>Cons of
<\/a>1. High interest rates<\/strong><\/h3>\n\n\n\n
<\/a>2. Short repayment period<\/strong><\/h3>\n\n\n\n
<\/a>3. Increased prevalence of predatory lending<\/strong><\/h3>\n\n\n\n
<\/a>4. High likelihood of getting trapped in the debt cycle<\/strong><\/h3>\n\n\n\n
<\/a>5. No positive effect on credit<\/strong><\/h3>\n\n\n\n
<\/a>6. Targeted at communities of color<\/strong><\/h3>\n\n\n\n
<\/a>7. Lenders have bank account access<\/strong><\/h3>\n\n\n\n
<\/a>8. Chance of lawsuit for unpaid balance<\/strong><\/h3>\n\n\n\n
Payday loan practices by state<\/strong><\/h2>\n\n\n\n