What Can Payday Loans be Used for?
There is always a great deal of anxious waiting between one paycheck and the next. Many times, you may get to spend your salary on several needs or savings, leaving you broke just before the next paycheck arrives. If you ever fall into a situation like this and need cash urgently, you can rely on payday loans.
Payday loans are a suitable type of credit facility for employees who need cash pending the time they receive their next wage or salary. Due to the nature of this loan and its recipients, it is usually a short-term facility, offering lower amounts than most traditional funding offers.
To get started on a payday loan application, you need to visit the official website of an online lender. In the alternative, you can access payday loans online from the page of WeLoans and compare offers. Before making your application, though, read up on this introduction to payday loans to get an insight into the advantages and disadvantages of this type of financing.
An Introduction to Payday Loans
The term “payday loan” gets its name from the fact that most of its borrowers have to repay their loans on their next payday. Typically, lenders offer payday loans to intending customers on the promise that they will make a repayment when they receive their next paycheck. Unlike personal loans, payday loan offers do not place emphasis on credit scores. Instead, lenders are more concerned with your ability to repay through a stable source of income.
Many payday loans have short repayment terms ranging from two to four weeks, giving borrowers enough time to repay with their salary. However, it is not the best option if you’re looking to make a large purchase. That’s because most lenders usually offer $1000 or less to cover small expenses or emergency situations.
Another important piece of information about payday loans is that they are perfectly suited to bad credit borrowers. Since the lender is more concerned with you having a regular income source than a good credit score, you can apply even if you have bad credit or no credit history at all.
Where Can I Get Payday Loans?
Payday loans are usually available at institutions called payday lenders. These types of lenders specialize in giving loans that you repay on your next paycheck. Some payday lenders are available online, while others have physical stores that you can walk in to apply. However, Nabila Yusuf, a financial writer from WeLoans suggests that borrowers can find payday loans by using a broker service.
Brokers are companies that link potential borrowers to direct lenders. Leading brokers like WeLoans allow you to get loans and send your information to reputable lenders in their network. This way, you can receive different offers from multiple lenders and compare the repayment terms, APRs and loan amounts. WeLoans offers its services for free, a feature that distinguishes it from most other online brokers.
Advantages and Disadvantages of Payday Loans
Payday loans are not entirely perfect without any negative sides. They, too, like other types of loans, can be problematic if not properly used. Below is a comparison of the benefits and demerits that most people face when they use payday loans.
Payday loans allow you some level of respite before you get your next paycheck. It also offers a lot of benefits to borrowers that we would examine subsequently.
Quick and Easy Application Process
Most payday loans, especially when applying from brokers like WeLoans, are easy to get. They have less serious requirements. You only have to be aged 18 or above and have a stable source of income, a valid ID and a bank account to qualify for a loan.
Suitable for Bad Credit Lenders
Bad credit score? No problem. You can still be eligible for a payday loan. Several lenders perform soft credit checks on your loan application without worsening your credit score. Besides, the emphasis is on your ability to repay with your paycheck, so your credit rating matters only a little.
If you fail to repay your payday loan on its due date, the disadvantages may outweigh its benefits. Here are some of the common cons that arise with payday loans.
Payday Loans are Expensive
One of the biggest arguments against payday loans is that they have the potential to attract outrageous APRs. Many lenders charge annual percentage rates of up to 400% on your payday loans, and this may make it harder to repay.
Unending Debt Cycle
Some payday lenders are predatory institutions that mask these loans to keep you trapped in an unending debt cycle. If you fail to repay a payday loan, your debt compounds, and there is a great chance you’ll have to borrow from other sources to repay what you owe.
Things You Can Spend a Payday Loan On
Since the amount gotten from a payday loan is small, there are only a few things that you can spend the loan on. For example, you can use your loan to settle medical bills, make minor home improvements or cover the cost of vehicle repairs. You may also be able to spend the loan on vacations, weddings, funerals or grocery shopping.
Alternatives to Payday Loans
Given that payday loans are very expensive, many people prefer to shop for alternative sources of funding. If you find yourself in that category, these are some loan options that you can consider before opting for payday loans.
- Personal Loans: These are loans that are repayable in installments. You can get larger amounts compared to payday loans, up to $30,000. Personal loans also have lower APRs than many other options.
- Title Loans: If you have a car, you can get a short-term loan using the vehicle’s title. You continue to use the car till you repay. While title loans are quite expensive, they do not cost as much as payday loans.
- Loans from Family Members: Skip the need for paperwork and interest rates by seeking out loans from relatives. However, ensure to repay by the time agreed to sustain your cordial relationship with your lender.
Closing Thoughts on Payday Loans
Emergency situations are a part of life, and you cannot predict when they will come. If they occur while you’re low on cash and far from your next pay date, you can seek financial refuge in a payday loan. Using brokers like WeLoans allows you to compare different offers and choose only loans that you can repay when due. If you consider payday loans to be too expensive, you can also consider some of the viable alternatives we listed.