Reasons Why You Might Decide On a Payday Advance Loan
Payday loans are often promoted as a speedy solution for a bad financial situation, helping you to bridge the gap between spending all your money and your next wage or salary coming in. The basic idea is that you can borrow a small sum of money for a short time of up to two weeks or so, and pay back the money at your next pay day.
This kind of facility can actually be very useful if you've run out of cash for daily living expenses, or if you're surprised by an unexpected bill or expense that you simply can't meet when you need to, but are cash advances always the good choice they're described as?
To start with, we'll examine the indisputable plus points of pay day loans, before looking at the problems, and possible different choices you may be able to utilize if you make up your mind a payday loan isn't the right option for you.
The lending criteria for cash advances are very generous indeed, and almost anyone who's working and has a suitable bank account will in all likelihood be accepted. This means that even people with bad credit histories should be able to make use of a payday loan, even after being turned down for nearly any other sort of credit.
They are also easy to sort out, and you can oftentimes get the money in your checking account in a matter of days. Some lenders can even fix up an overnight deposit of the money straight into your account the very next day, which is plainly very handy when you need money fast.
Last, once you've been approved for your initial loan, it's normally a really easy matter to 'top up' your loan again if you find you need to make use of the facility if cash is again short in the future.
There are, nevertheless, two major disadvantages to cash advance loans which you seldom read in the adverts and web sites providing them. Firstly, they're very costly in comparison to other sorts of finance. Because the term of the loan is so small, a fee of 20% of the amount you borrow – which is roughly average – will result in an extremely high APR.
The second disadvantage is related to the first: because they're so costly, you can easily be left without enough cash the next month once you've cleared the loan and paid the fee. In this scenario, it's simply too simple to roll over your loan again to cover the shortage, resulting in more fees, and an endless cycle of borrowing.
So, if you determine that a payday loan isn't a good choice for you, what alternatives do you have? The first one is using a credit card, if you have one. While credit cards are usually also fairly costly kinds of finance, they do allow you to extend the debt over a a few months rather than needing to be paid 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 APR on an authorised overdraft is in all likelihood going to be less expensive than that of a credit card, but your bank might not extend you the facility. Be careful about going ahead and overdrawing without your bank's prior agreement, as the fees they will impose in this case will be punitive.
If neither of these options is accessible to you, and you have no other way of acquiring money such as borrowing off family, then a payday loan may be the best alternative. Just make sure that you use it cautiously, and listen to the warning sign it's giving you about the longer term state of your financial life.
Martin writes for a payday loans provider in the UK, and you can read more about the pros and cons of cash advances at his site as well as applying online.