The Pros and Cons That Come with a Payday Loan

Payday loans come with many pitfalls, but can be a viable solution in certain scenarios. To avoid the debt cycle, understand the risks read on.

The Pros and Cons That Come with a Payday Loan

The Pros and Cons That Come with a Payday Loan
The Pros and Cons That Come with a Payday Loan
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Payday loans can be a lifesaver at a time of desperate need; however, it can be easy to get done over by one of these loan alternatives, which can leave you in a worse financial position than you were in before. Making sure that you understand the risks involved with taking out a payday loan is essential before you take one out so that you can compare them with the benefits, and to help you make an informed, yet final decision. Today, we will be looking at what a payday loan is, the pros and the cons of taking one out, and alternatives you can consider.

How a Payday Loan Works

Understanding how a payday loan works is the first step you need to go through before analyzing costs. A payday loan is basically a cash advance against a pay check. You choose the amount of cash you need to borrow, the money is lent to you, the loan needs to be fully repaid in a set amount of time, and the interest rate is normally high. If you miss the repayment date, additional fees normally apply. A pre-authorized check is usually carried out by the lender in order to protect themselves if you end up defaulting.

Pros of a Payday Loan

If bad credit is an issue and your health or working ability is affected by an emergency expense, the idea of getting a payday loan can come across as a saving grace. When they are used effectively, the loans can act as a viable solution to a short-term financial problem. It normally takes around half an hour to complete the application. Loans from online providers tend to have a simpler approval process. Most payday loans don't have a credit check and the money you need can be available within an hour.

Cons of a Payday Loan

Being able to follow up with the repayment terms is the issue most people face after they take out a payday loan. The interest is very high on these loans, making it easy to get snowed under with debt once you have taken it out. If you find yourself needing a payday loan, it normally means you have a limited flexibility financially, otherwise you wouldn't need to borrow the emergency cash. When you add on the fees and interests involved, additional loans may need to be acquired to make ends meet.

Alternatives to a Payday Loan

Payday loans are simple, but if you find yourself looking into getting one, do your research to see if there is a better alternative to a payday loan, such as a loan from Maxlend is an alternative to a payday loan due to offering repayment over instalments. The application is just as easy as a payday loan and your cash will be with you on the same day. Finally, the feasibility of a loan from a friend or family member should also be considered.

At the end of the day, the responsibility of a loan falls on the borrower. It's possible to take out a payday loan and repay it with no issues, as long as you have done your research and are aware of what you need to do to pay it back. Just don't forget to look at the alternatives.

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