Payday Loans Advantages and Disadvantages

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Payday Loans Advantages and Disadvantages
Payday loans have pros and cons, just like any type of credit. Used wisely, payday loans can get you through a cash shortage quick. They can also help you avoid outrageous late fees and hits to your credit record. However, they are not the best credit option for long term credit needs. Cash advances are also limited to no more than $1500, less in some cases.

Fast Approval, Fast Cash

One of the prime benefits of a payday loan is that you can get approved and have your cash fast. Online applications take only a few minutes to fill out, especially if you choose the no fax option. Once submitted, your approval notice will show up in minutes. By the next business day, your cash advance will be sitting in your checking account.

No other form of credit can do that. In addition to a fast process, there is no credit check. Lenders simply request personal information, source of income, and account info.

Skipping Late Fees

Payday loans offer financing fees that are usually less than late fees, especially if you add on a NSF fee. A few bounced checks can quickly add up to a hundred dollars. But cash advances fees are typically around $15 for every $100 you borrow.

You should also consider the affect of late payments on your credit history. Late or missed payments stay on your report for seven to eleven years, increasing your interest rates for years to come.

Find Better Long Term Credit

Payday loans were never meant to be carried for several months. They are just designed to get you to your next payday. If you want several months or even weeks to pay off your loan, choose long term credit. Credit card rates are a fifth of payday loans. Personal loans are even better.

Loan Caps

Depending on where you live, there are caps on how much you can borrow. Most lenders cap their loans at $1000, but some will go up to $1500. However, if you live in Illinois, your payday loan limit is $400. $300 if you live in California or Hawaii. Your income will also affect your limit.

For larger loan amounts, you can turn to other sources of credit. Credit cards and personal loans can be helpful for unsecured debt.

Here are our Recommended Payday Loan Companies online.

Carrie Reeder is the owner of ABC Loan Guide, an informational website about various types of loans.

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Payday Loan - Will I Need a Checking Account

Yes, you do need a checking account in order to secure a payday loan. A checking account allows a lender to obtain payment from you. It also allows you to receive your cash advance fast. While the requirements for a payday loan are minimal, there are a few you should be aware of.

Payday Loan Payments

Payday loan payments are structured differently than other forms of credit. You don't receive a bill in the mail for a series of monthly payments. A cash advance loan is paid off entirely on your next payday.

Your lender will automatically deduct the amount from your checking account unless you make prior arrangements. With online lenders they will withdraw funds as if you made a purchase with a virtual check or debit card.

Of course, you can make a partial payment. But that will cost you more in fees. You simply call or fax your lender a notice prior to your payday. They will still deduct the lending fee, but that is usually between $10 and $35.

Receiving Your Cash Advance

A checking account also allows you to receive funds quickly from your lender. Within a matter of hours, online cash advance companies can wire your money into your checking account. By the next morning, you will have the funds to take care of your bills.

Other forms of credit can't work that fast. Credit cards take weeks to receive in the mail. Personal loans can take days to receive your cash through a check or wire transfer.

Other Payday Loan Requirements

Payday loan requirements are fewer than other forms of credit. You don't have to have a proven payment history, assets, or collateral. Cash advance companies do ask that you be at least 18 years old, have a reliable source of income, and a permanent address.

With many online payday loan companies, you simply entire the information online through a secure server connection. They will then verify the information through their sources. Other companies ask for faxed documents. While the process can be a hassle, they sometimes offer better rates.

Some states also have additional requirements. Some state governments limit the amount of your cash advance and how many you can have open at once.

Shopping lenders will give you the best deal and the most options when choosing your payday loan.

Here are our Recommended Payday Loan Companies online.

Carrie Reeder is the owner of ABC Loan Guide, an informational website about various types of loans.


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Payday Loans Advantages and Disadvantages
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