Payday loans are financial instruments that come in handy when an individual is an emergency situation and is in desperate need of some quick cash. These payday loans are quite popular in the UK when compared to most other parts of the world. As a result, one can find several different payday loan lenders or facilitators willing to lend a helping hand to UK residents during times of a financial crisis. Payday loans come with several benefits; however, they are not devoid of any drawbacks. We shall, therefore, have a look at some of the advantages and disadvantages associated with payday loans.
Advantages of Payday Loans
Payday loans can be very convenient for people who are in need of some quick money, and who have the ability to return the borrowed amount within a short time period. The process of applying for these loans is also easy, as every payday loan facilitator accepts application from borrowers via the Internet. In addition, the application usually tends to get approved within a few hours. This easy and quick application process can turn out to be quite handy for people who need the loaned amount within a few hours. In short, the entire process is quite hassle-free.
Unlike most other traditional loans, the eligibility requirements for payday loans aren't very stringent and narrow. Any UK resident, who is 18 years and above, can apply for payday loans. In addition, the borrower must have a reliable and steady employment status, along with an active bank account. The credit history and the previous borrowing records of the applicant are not looked into by payday loan lenders. This means even those individuals who get neglected by traditional banks and other financial institutions, can count on payday loan lenders for financial assistance.
Disadvantages of Payday Loans
There is no perfect thing in this world and payday loans are no exception to this fact, either.
When compared to other traditional loan instruments, the interest rates attached to payday loans are quite high. In fact, the rates can even touch the 30 percent mark. In addition, if the borrower does not manage to repay the loaned amount within or on the date of repayment, the interest rates would most likely double up.
Short Repayment Period
Most of the payday loan amounts have to be repaid within a few weeks. The maximum time on hand is usually a month. The repayment date would most probably coincide with the payday of the borrower. Therefore, if the borrower's payday is a couple of weeks away from the date of the loan, the time provided by the lender for repayment would be those two weeks in the interim.
Payday Loans for the Long Run - Not Recommended
People who are on a lookout for some long-term loans are not advised to take this quick cash path. This is because by the end of the loan period, the interest and other charges may zoom up and the borrower might end up paying a hefty sum at the end of the loan maturity period.