Thanks to high-speed Internet and quick online services, getting a loan is easier than it used to be, say, 20 years earlier. As with any service, payday loans are associated with their own set of plus and minus points. The trick lies in being able to discern exactly when such a loan would be useful.

Before explaining when a payday loan would be useful to you, it's 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 of 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 beginning of a vicious cycle of debt
  • You require a loan for impulse spending or spending on luxury or non-essential items; if you want to buy that expensive perfume, hold on until you have enough money to do so. The same goes for holidays, gifts and clothes shopping
  • Your income is low. Keep in mind that fast loans are usually expensive. The interest rates are exorbitant. If you earn a low income, these might not be for you. Ask for help from your bank or financial advisor instead

There are certain advantages of payday loans:

  1. They are fast, easy and hassle-free to procure: If a loved one is in hospital and you need airfare urgently, payday loans are a good option. The approval is often within the hour and you can get the cash almost instantaneously
  2. They are an excellent option if you need urgent money on a weekend or public holiday. Since the Internet operates 24 x 7, payday loans are always accessible including nights and over weekends
  3. If you have a bad credit history, there are certain lending companies that will be happy to offer you credit. It's important to bear in mind that loans given despicable bad credit might (and often do) cost more. The interest rates could be higher. But the option is available in the event of a dire emergency
  4. The application process is simple. The forms usually ask for your name, contact, age (you have to above 18 years of age), employment details, salary earned etc. You may have to scan your ID, bank account details and employment certificate
  5. You can apply for a payday loan from the comfort and privacy of your home. There is no need to run back and forth to banks and other lending institutions.

In order to avail of payday loans, you may want to keep the following precautions in mind:

  • Ensure that you are aware of the 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 for too much, you can report them to the consumer bureaus
  • Apply for an instant loan only if you are seriously stressed out for cash. Remember, payday loans do not come come free. Sit down and analyze if the situation really warrants an application for a payday loan
  • Before applying, calculate and see if you can handle the reimbursement schedule. If you skip repayment deadlines, you might have to pay double or even triple the interest rate. The company will then offer to rollover your loan but it will not disappear. You might end up paying interest rates of 400% per annual.
  • Compare and check if your credit card company can help you out with a loan instead of a payday lender

Payday loans fit the bill only if:

– The emergency is urgent and pressing

– You can repay the principal and the interest amounts without getting squeezed into a corner

The trick is to pay off your loan and wipe it off your slate for good. Avoid rolling over the loan or delay repayments.



Source by Nirupama N Raghavan

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