Just because you can get payday loans does not mean that you should. There are a number of advantages and disadvantages to taking out these short term loan options and you should always look into them to make sure they work for you.
Payday Loans Can Help Your Credit Rating
The best advantage of payday loans is that they can genuinely help your credit rating. You will be able to show that you can borrow money and pay it back on time; this will show that you are a lower risk to lenders.
Of course, this is a double-edged sword. If you miss the payment, you could find that your credit rating is blemished with a black mark. Also, if you take out a lot of loans in a short space of time, it may seem like you are overstretching yourself financially, and will look irresponsible on your credit report.
Payday Loans for Bad Credit
It is possible to take out payday loans even if you have a bad credit rating. This is great news for a number of families who are struggling to get financial help when they really need it, due to mistakes or problems they have had in the past.
There are requirements that you must meet to be able to gain approval for these short term loans. The main one is that you need to be over 18. The next two requirements will differ between companies. Most companies ask that you are in full-time employment but there are some lenders that will allow you to take money out even if you are working part-time or if you are self-employed; these are factors that you will need to shop around for.
Interest Rates Are High for Payday Loans
There are many loans that will have 1000% or 2000% APR. The idea is that you will pay off the loan by your next payday, which will be within 31 days. Because of this, there are usually set fees that are applied to the amount of money that you take out, rather than interest rates.
The fees are usually much lower than the traditional charges on your unapproved overdraft or the fees for going over your credit card limit. There is a chance that you could get your fees lowered on your cards or overdraft, so this is also something to consider.
Payday Loans Are for Small Amounts of Money
You cannot take out large amounts of money with these short term loans. You need to remember that you are required to pay them back by your next payday; you can only take out as much as you can afford. The lender will usually tell you the maximum that you can take out based on your income for the month, which they will check on. Just because they have said you can take out the money does not mean that you have to take the full amount; only borrow money that you need to with any type of loan.