Payday loan is an effective safety net because one could never foresee what could come into their way and causes lacking cash. Failure to settle important costs such as, educational fees, fixed bills and payments leads to more burdens and worries.
All of your commitments and sudden financial requirements are easily insured by the quickness of a payday loan. You can also avoid overdue repayments, maintain your credit score and prevent the cost of penalties.
What is a payday loan and how does it work?
Payday loans are short-term loans to help you in financial stress in an instant until you get your next salary. The idea is that you get the value of money you wish to help you clear off your outstanding commitments and you are anticipated to repay in the span of two weeks or coming dates to your payday – hence, the name.
People typically get it mixed up with short-term loan or personal loan.. However, they are rather different. The main dissimilarity between short-term loans or personal loan and payday loans is usually the number of repayments you make. More often than not, you usually repay payday loans around a month or two after you borrow the money or on your next paycheck– in lump-sum payments. With short-term credit, you may make your payment in two to twelve months’ time.
Payday loans provide funding for borrowers who are in need of cash to bear with accidents, medical dangers, unemployment, and other financial misfortune. All of us have monthly commitments, additional expenses for other things. Unfortunately, some struggle to survive in the midst of the month waiting for their next pay-check.
What are the Benefits of Payday Loan?
We listed some of the benefits of payday loans, during financial struggles these benefits of payday loans may help you get through your financial dilemmas.
1. They are easy to access
It is not news that payday loans are accessible to you at any time and anywhere. With payday loans the possibility of unexpected happenings, lenders that provide services for payday loans are usually available to help you apply for your loan all day and all night. A lot of companies now let you apply online for payday loans and visit their corporate buildings for the contract signing only.
This way, your waiting time is at minimum and you are able to get your approval immediately.
2. It is very easy to qualify for payday loans
Unlike mortgage loans and other major loans, payday loans do not require you to meet very specific criteria. Also, there are not many of your particulars needed when filling in the form for a payday loan.
The key requirements to bear in mind would just be the usual, such as owning a stable income, aged 21 years and above as well as having an active bank account.
Other than that, most lenders would just like to get information of your past financing; have you ever had a default, or have you ever applied for a payday loan previously.
3. They have fewer requirements than other loans
Conventional payday lenders in the past will want to have a look at more complicated documents like a credit report, bad credit history upon application before determining if one is eligible to apply for a loan or not. In contrast, when loans like a payday loan are concerned, it is quite easy to fulfill the requirements.
Most importantly, listed below are the essential needs you got to have to qualify for the application:
- A Singaporean or a permanent resident
- Be 21 years old or older
- Have a government ID or Social Security Number
- Have a regular and steady source of income or job
- An active bank account
Other than that, you will only have to present common information and documents such as your current employment letter. It will be the evidence of proving you are working full-time. As well, applicants will be expected to submit along their current payslips.
If you have only been working for less than 6 months, in most cases you will be requested to show an appointment letter. Further, you got to get ready with your income tax statement and your bank statements. And that would be it.
4. Your credit score is not important
If you have been battling the worry of being qualified for any loan due to your inadequate credit score or if you have a bad credit history– you can brush off your worries now. One of the main benefits of taking a payday loans is that lenders would not strictly look at your credit report. Upon application, payday lenders usually evaluate your ability to repay the loan depending on the information and documents you submitted.
Your credit score will only play a role in deciding the overall interest rates you are going to be charged in making your repayments. Meaning to say, individuals with better scores than others will be able to reap the benefits of the lower interest rate.
Nonetheless, the good news for those with current not-so-good credit reports is that; a payday loan could actually help you better your credit score overall. That’s one of the amazing benefits of payday loans.
5. It is an unsecured loan
One other prime worry that bothers borrowers would be putting collateral during application process. It would be a relief knowing that a payday loan is an unsecured loan, hence, you need not put up your personal property as a guarantee.
Lenders will not be legally entitled to seize your properties in any case that you fail to clear your debts. You have eliminated one more consequence with payday loans.
6. It offers higher loan amount
Usually, the amount you are allowed to take up is depending on your current pay range as well as the lender’s. For first-timers with payday loans, the loanable amount will be limited. However, depending on how consistent and disciplined you are when repaying your first-time payday loan, lenders will usually let you borrow for a higher amount in your next applications.
Additionally, the least and most amount you could get from your lenders also depend on what is permitted within your state laws.
Just ensure that you focus on clearing your payday loan debts on time. This could lead to an establishment of a pleasant relationship with your lenders. This way, you will have something to turn back to when you are faced with a financial bump.
7. It guarantees fast approval
Payday loans are known in the industry to be one of the ‘fast cash’ loans. Thus, you can be pleased to be receiving your money on the very same day, or latest will be the next working day. It only requires one condition from you; it is to provide enough documents as well as information requested in the application process.
The even better news is that some lenders could even give off the loan money both of you have agreed upon in the span of an hour of waiting time only.
We cannot deny that traditional loans take up too much of waiting time that it would add up to your burden in any financial urgencies. Their procedures generally need from days up to a few weeks with quite complicated documents required.
8. The loan can be used for anything
We commonly hear that people think payday loans are allowed to be spent for personal needs and come with high interest rates. This, nonetheless, is not true.
Some benefits of payday loans is that borrowers have the freedom of choosing how they will be spending their loan money. Lenders do not have the authority to set what you could use the money for. With that said, other than having the freedom of spending, it gives you comfort in knowing that you could have it in your own way to either clear off any of your overdue payment or any unpaid debts. Some borrowers even would use the loan money to invest in a small business.
9. They have fixed interest rates
Oftentimes, borrowers would much prefer to take up a loan with a fixed interest rate. Payday loan severs you just that. This is due to the fact that it provides you a sense of certainty with the rates of interest over time of your repayments.
The amount that is agreed between you and your lender is set and cannot be changed under any circumstances. As an example, if the lender happens to change their interest rate policy after you have signed the loan contract with them, the changes will not be effective upon you no matter how higher the new rates get.
In the long term, this will help you to ease your financial budgeting. The bliss of knowing for certain how many you are going to pay for interest each month diminishes the anxiety of shortage in cash.
With constant fluctuation happening in the market, fixed interest rates will be best suited for a lot of people.
10. It can help rebuild your credit score
The shorter repayment tenure may turn some people off their intention of taking up a payday loans. The reason for this is, payday loans acts as a safety net for you while you await your next paycheck. Secondly, a brief payday loan repayment period will in turn repair your unsatisfactory credit score.
Applying for a conventional loan would risk your credit report in the sense that, we never know what might happen in the midst of you repaying your loan amount within a longer tenure.
You would be left with an outstanding debt if in any event you lose your income or face a medical emergency that requires a large amount of expense.
As a result, this will take its toll on your credit rating. You might also be charged with a penalty or a fine due to the inability of paying your overdue funds. This will only add up to the existing unpaid debt.
This is the reason that a payday loan could help you get through your financial obstacle. You get your cash quickly and have the opportunity to clear the debts quickly too. It does not interfere with your credit score if you plan well and are able to repay.
You will not be stuck in a spiralling headache of having to stay committed to repaying a loan for a long time. Not only that, borrowers who manage to pay on time will qualify for a higher loanable amount next time.
The short-term loan characteristics of a payday loan may seem like a drawback in the first place, however understanding how it fully works will make you realize it is one of the best options out there.
Also, no party could dictate on how you choose to spend your loan money. Lenders will only have the authority in making sure you pay back on the dot.
If you have made your mind to apply for a payday loan, we highly advise that you first get your research done and compare all of the available lenders in the market. This can be easily done through Loan Advisor.
It is a loan comparison site that lets you know the lenders’ who provide the service that you are looking for. Other than that, you could also get to know their terms and rates at once.