Can Payday Loans Be Good? Should You Take out A Payday Loan?
A payday loan is a loan with a limited value with a fast application process. It allows every person to quickly solve financial problems. This is the very reason why such a product is in demand among citizens. Payday lenders lend small amounts at a certain rate for a short period, which often does not exceed a month.
Many people ask the question whether payday loans can be good and should people issue them to cope with temporary financial problems. We are going to give you some recommendations on how to avoid problems with payday lending options. Let’s start with main rules and recommendations.
Main recommendations on how to issue a small-dollar loan correctly
Based on the questions above, the main recommendations to borrowers of payday loans can be:
- when applying for a loan, carefully read the terms – as a rule, its term is limited, and if you do not have time to meet this deadline, it will be recalculated at the extra interest rate what can bring troubles;
- pay attention to the interest rate. On average, in the online lenders of the United States, it is 1-2%, but these rates are accrued daily, which makes the overpayment very large. This is how short-term loans of all kinds work;
- use actual information when filling out the application. To verify the data of borrowers, lenders use a scoring analysis model, or a credit specialist does it manually. In both cases, each field in the request will be checked, so even typos in the first or second name are not allowed. In case of an error (intentional or accidental), the loan will be refused, and if the company considers it an attempt of fraud, the user will be blocked altogether.
You can describe the pros and cons of a small loan for a very long time, but the fact remains that it depends only on the borrower whether this service will benefit and help out in a difficult situation or turn into a debt trap due to non-compliance with financial obligations.
Is it worth resorting to the services of payday lenders?
By resorting to the payday lending services and issuing a financial product, the borrower can obtain the status of a reliable client, and thus restore his damaged credit history. And also to borrow the necessary amount without proof of income, surety and collateral. But if we take all the pros and cons of this service together, then we can draw several obvious conclusions:
- It is better to take out a payday loan when the borrower has confidence that he will be able to return the borrowed money.
- It is better to issue a loan for a minimum amount and for a short period.
If we take into account the fact that commercial banks are not engaged in small lending and do not issue extra cash for a short time, then it is difficult to argue with the relevance of financial products of payday lenders. But whether it is worth resorting to their services or not depends on how confident a person is in his future and capabilities.
Let’s grapple with the philosophy of payday lending services.
The philosophy of payday lending options
Assessing the micro-credit market from the consumer’s point of view, two circumstances arouse interest in: how will the development of the microfinance sector affect banks and will it result in any relief for customers? Analyzing this philosophy, experts almost do not leave people any hope that in the near future “fast” loans will become cheaper.
The essence of payday loans is simple: each of us has borrowed money for a short period of time at least once in life. For example, we can ask a colleague to borrow $100 up to a coming paycheck. Often we borrow money from the same people and regularly return it in 3 days, in a week. But here’s what to do if the money was needed today, and these people left, or they don’t have the right amount.
Financial experts confirm, in such a situation, many would agree to borrow extra cash, and repay it a week later with some interest accured. But in terms of “annual” it turns out that we took a loan at a high rate. But in this case, people are ready to pay them instead of taking certificates from the place of work and collecting a pile of documents in the bank, despite the fact that they offer us rates 10 times lower.
That is, the development of the payday lending market depends on the development of banking services. If a bank can issue a loan in 5 minutes and only with one document, then payday lenders will leave the market.
Online services do not compete with each other, they help each other by developing the market. Their main competitors are banks. In the case of the development of banking services in the direction of simplifying the requirements for borrowers, the rates in payday loans will decrease and vice versa.
Thus, the success of microfinance depends not on interest rates, but on access to potential clients. That is, if the branch of small-dollar loans is located next to banks, or in a highly passable place, then it is in a more favorable position relative to the branch that offers a lower rate.
We hope you get payday loans are good in case when you treat them correctly. If you understand the risks they may have, you may take all the efforts to avoid them.
Category: Online Loans
Tags: finance, online loans, payday loans