Are payday loans worth it? PROS and CONS of getting a payday loan

Our paychecks always seem to come too late and go too fast. It always seems like the paycheck day is so far away while your expenses keep piling up and once you do cash in your salary, you spend it so fast that it feels like you’ve never even been paid. Sounds familiar? Well, rest assured, you are not the only one in that situation.

Oftentimes you find yourself in the scenario in which you urgently need some money to take care of some unexpected emergencies, but your paycheck day is nowhere near. That’s where payday loans come in.

Payday loans are basically loans, cash advance loans to be more specific, that you can get from a payday lending office. When you sign up for such a loan, you get the needed amount of money which will later be subtracted from your paycheck, along with an additional interest, which is quite high to be honest.

The payday lending industry is a really prosperous one and research shows that 1 out of every 6 Americans has taken such a loan at least once in their lifetime. The US is packed with such locations, which are even more than all the Starbucks stores in the country.  

Payday loans differ from usual bank loans. First of all, there are limitations in how much money you can borrow (the higher limit is usually around $1,000). Then there’s the loan term which is also shorter than with regular bank loans. With payday check loans you usually have to give the loan back at the next paycheck, meaning within weeks from getting the loan. The interest rates are also different. The interest for a payday loan is significantly higher, which is not the best thing, especially given the fact that you only have a few weeks to pay up. You also don’t need a credit (good or bad) in order to apply for a payday loan.

PROS and CONS of getting a payday loan

PROS

As we’ve already mentioned, you don’t need a good credit, or any credit for what that matters, in order to get a payday loan, which is definitely an advantage. You also don’t have to commit to paying years and years of interest rates, you repay your entire loan in a matter of weeks and then you’re done with it. Getting a payday loan is also a very quick and easy process, you don’t have to wait for days or weeks to get approval, as with other types of loans. The whole purpose of payday loans is to help you solve any financial emergencies that can’t be postponed. So you can say that they are a very reliable source of money for emergency situations.

CONS

The biggest disadvantage with payday loans would have to be their high interest rates. There are cases in which the annual percentage rate is even 800% or 1000%. You have to be very careful when you apply for such a loan and get really well informed on the perceived interest rates. You also have to pay back the loan in time, otherwise it will become even more expensive. Another drawback of the payday loans is the fact that there are set limits, so you can only borrow smaller amounts of money than with other loans.