May 15, 2015
If you haven’t yet heard of the term online cash advance loans or any of its other synonyms, consider yourself lucky. However, if you live in Canada, it is unlikely that you or someone in your family have had to take a payday loan at least once. As many financial experts define it, payday loans are a trap for the financially strained to become financially strangled. Payday loan is a very generic term and you may also here other names like short term loans, cash advance loans, advance payday loans etc. All these relate to the same financial tool. These loans are basically loans of small amounts, typically $500, but sometimes reaching up to $1500, that are given to people for a very short term, generally less than a month. The borrowers do not have to give any collateral for the loan. In fact, even people with a bad credit history can get online cash advance loans. Isn’t it great? What is the fuss about then? The fuss is about the charges. Since online cash advance loans are high risk loans, lenders charge a sky high interest rate and other charges to mitigate their risk. As a result, you end up paying a lot more than you borrowed. Here are some pros and cons of online cash advance loans.
Pros of payday loans
- No collateral: Payday lenders require absolutely no collateral required. This is because the amount of online cash advance loans is very small.
- Credit history no bar: Even if you have a bad credit history that would not be an obstacle in you getting a payday loan. Payday lenders do not actually check your credit history, they only check whether your current monthly income is sufficient for you to take care of your household and then return the loan along with all charges back by the next payday. If you have a steady income source, consider your loan approved.
- Quick and Easy: Have you ever tried to get a loan from a bank? There are 3-4 forms that your would have to fill, handle multiple verifications, provide references and even after all this, wait for at least 15 days to a month in order to receive an approval. When you apply for online cash advance loans, you don’t have to go through all these hassles. The entire procedure is online, from filling up the form to receiving the approval. The best part is that the approval comes through within 1-2 business days of submitting an application. That is lightning fast considering how much you have to wait to receive a loan from a bank.
Cons of payday loans
- High rate of interest: Even though there are state regulations limiting the interest rate that lenders charge, these regulations are generally not sufficient. These regulations as it is put the cap very high and even after that, lenders find ways to circumvent the rules through service charges are other charges.
- It is easy to enter a loop: Money is easily available through online cash advance loans and hence borrowers consider payday loans an easy way out through their financial troubles. This way, the face a risk of entering a continuous loop of loans. This is why it is always suggested that payday loans should not be considered as a solution to long term financial debt. They should be taken only to take care of urgent financial needs that a person is not prepared to handle.
- No impact on credit history: You defaulted on a loan some years back due to some issue and have never been able to take traditional loan from a bank ever since. Even though you paid back all online cash advance loans back on time after that, your credit history has seen no improvement. Payday loans do not impact your credit history in any way, neither positive, nor negative.
Always keep the pros and cons of online cash advance loans before applying for them. You should carefully calculate your financial situation before taking a decision to take out a loan. Payday loans should only be considered as an option after you have exhausted all other possibilities of funding a financial emergency.