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Why Should You Choose a Payday Loan
Date Added: June 21, 2011 02:37:32 PM
Author: Martin Sumner
Category: Finance

Payday loans are often promoted as a quick fix for a tough financial situation, helping you to get through the time between running out of money and your next pay day. The basic idea is that you can borrow a small amount of a few hundred dollars for a short time of up to two weeks or so, and repay the loan next time you get paid. This sort of facility can indeed be really handy if you've run out of cash for living expenses, or if you've been hit with an unpredicted charge or expense that you simply can't cover when you need to, but are cash advances always the good choice they're presented as? First, we'll examine the undeniable advantages of pay day loans, before looking at the problems, and possible alternatives you may be able to use if you decide a fast cash loan isn't the right option for you. The lending standards for wage advance loans are not very strict at all, and almost anyone who's employed and has a suitable bank account will in all likelihood be approved. This means that even people with unfavorable credit ratings should be able to get a payday loan, despite being turned down for nearly any other type of finance. They are also easy to sort out, and you can oftentimes get the money in your account quickly. Some providers can even fix up an overnight deposit of the money straight into your bank account the next working day, which is patently very useful when you need money in a hurry. Last, once you've been approved for your initial loan, it's usually a really easy matter to 'roll over' your loan again if you find you need to make use of the facility if money is again short in the future. There are, nevertheless, two major downsides to cash advance loans which you seldom see mentioned in the ads and web sites promoting them. Firstly, they're very pricy compared to other types of credit. Because the term of the loan is so short, a cost of 20% of the advance - which is roughly standard - will result in an eye-wateringly high APR. The second drawback is often a result of the first: because they're so expensive, you can easily be left lacking money the following month once you've cleared the loan and paid the costs. In this scenario, it's simply too easy to roll over your loan again to cover the shortage, incurring more charges, and an endless cycle of borrowing. Therefore, if you determine that a payday loan isn't a good choice for you, what alternatives do you have? The first one is making use of a credit card, if you carry one. While credit cards are normally also fairly pricey kinds of borrowing, they do allow you to spread the debt over a number of months rather than requiring it to be payed back immediately along with a fee. Almost all bank accounts now offer an overdraft facility, which can also be used to tide you over a temporary lack of money. The interest charged on an agreed overdraft is probably going to be better than that of a credit card, but your bank might not approve your application. Beware of going ahead and overdrawing without your bank's agreement, as the interest they will levy in this case will be punitive. If neither of these options is available to you, and you have no other way of getting hold of money such as borrowing off family, then a payday loan may be the best option. Just make sure that you use it cautiously, and heed the warning sign it's giving you about the longer term state of your finances.
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