What do you have in your mind when you hear about payday or personal loans? It could be a fast source of emergency funds or a headache of debt. In most instances, payday loans and personal loans fill the gap when you have an emergency and do not have enough cash.
Indeed, millions of people live from paycheck to paycheck, and they cannot afford to cater for a $400 emergency. And that's why you find that payday loans are growing day in day out.
Before we head to the advantages that you get from payday and personal loans, let's first know about these loans.
What are payday and personal loans?
When I say payday loans, I mean the kind of loans you take in the middle of the month and repay them at the next paycheck. The interest rates are usually high, starting from an APR of 390%—which is higher than a typical loan.
The payday lenders hide in the high rates, saying that they cover the risks of defaults since they deal with high-risk clients.
The payday lenders hide in the high rates, saying that they cover the risks of defaults since they deal with high-risk clients. However, the high interest doesn't stop people from taking payday loans.
Personal loans carry a wide variety of loans that you take to do individual needs. The lender doesn't restrict you on how you can spend the personal loan you take. And that is different from Mortgages or auto loans.
What are the advantages of payday and personal loans?
1. It's easy to acquire
In most cases, anyone can get a personal loan—as long as they prove that they can afford to repay the loan. In addition, the application process is usually transparent and straightforward. Still, there is not much documentation needed by the lenders, unlike other loans requiring collateral.
You only need to have the following:
- A valid identification document
- Actual resident address
- Steady source of income
- Be over 18 years of age
That means that getting a personal loan is not that complicated.
2. They are unsecured
Payday loans and other personal loans do not require a borrower to have collateral when applying for the loans. And that means that if you default the loan, the lender will not come looking for your property to recover their money.
The lenders depend on your ability to repay, and that's why they don't drag you to provide collateral.
3. There are no credit checks
When applying for the fast payday loans online, the lenders do not run credit checks. This is because they believe that the past doesn't dictate how the future should be. In addition, your paycheck determines how much you get as a payday loan.
You can spend a personal loan for whatever reason that you wish. It can be going for vacations, car repairs, home improvement, debt consolidation, education, or even paying some grocery bills.
The lender does not stall to know how you spend the money. All they need is for you to pay as per your agreement.
5. Better interest rates
If you have a good credit score for personal loans, you can get a loan with better interest rates than payday loans. Getting reasonable interest rates ensures that you do not get into a debt trap due to the high interest rates.
6. You can apply for a payday or a personal loan online
With the ever-growing technology, payday and personal loan lenders have flooded the internet with exciting loan offers. The customers are on the internet in today's world, so you have to take the services to the internet. And that's what the personal loan lenders have done.
Personal and payday loans can be an excellent way to get emergency loans. However, if you do not manage them well, you may end up in a cycle of debts. Therefore, you can consider creating other sources of income that can help you stay out of debt in the long run.
Remember that if you need a loan, you should only take the exact amount you want. Do not take more than you can repay comfortably.