Key Points About Online Payday Loans
- Over 12 million Americans take out payday loans every year.
- The best things about online payday loans are how quickly you can receive your funds, the simple process, and that you don’t always need to go through a credit check.
- Payday loans are an expensive means of borrowing, with around 400% APR. They should only be taken out if truly needed.
- Payday loans are only a good option if you can repay your loan and work with a regulated lender.
Many of us find ourselves in financial trouble at least once. 75% of payday loans are taken out by those who are not first-time users, showing how common it is to find yourself drowning in bills and debt. Payday loans are often a good option when trying to work through such troubles, but what are the benefits and downfalls of online payday loans?
Advantages Of Online Payday Loans
Applying for an online payday loan can take as little as five minutes. If you are working with a broker like ourselves, your application can be completed online and easily. We only require a few personal details, such as your employment status, income, address, how much you want to borrow, and how long for.
After submitting your application, you could have your funds in your account as quickly as the same day if you are approved. Sometimes, unexpected costs can be time-sensitive, and that’s why borrowers in a pinch often turn to payday loans.
Yes, payday loans are expensive. But, as a broker, we work with a panel of trusted lenders. When you submit your application to us, we will assess your request and match you with the lender who can provide you with the best rates.
If you work with a regulated lender, you know you are safe. They work according to federal and state laws, and as long as you stick to your repayment plan, you are safe in the knowledge that your lender is reliable.
Doesn’t Interfere With Personal Relationships
Around 60% of Americans have lent money to a loved one before. While, usually, this money is both borrowed and lent with good intentions, 35% of those lenders have reported consequential damage to their relationships. Using a professional lender prevents you from crossing wires between your personal and financial life.
No Credit Check
Many of us worry about our credit ratings holding us back when trying to secure a loan to tide us over. Many payday lenders understand this all too well, and are therefore willing to provide no-credit-check loans as long as you commit to paying your loan back. You can check the FICO website to check your credit score, which is a number between 300 and 850, which you want to be at the higher end of.
Downsides Of Online Payday Loans
With APR rates of around 400%, payday loans are not a cheap means of borrowing. APR represents the cost of borrowing, and you will have to pay this back on top of what you borrowed. Consider if you borrowed $375 for two weeks with 400% APR. The APR (applied to the two weeks) totals $57.53.Therefore you pay back your loan plus interest, which is $375 + $57.53. The total you owe is $432.53.
Consequences Of Defaulting
Only 14% of borrowers can repay their loans. Failing to repay your loan can land late fees at your feet, cause you to have to pay higher interest, damage your credit score, and, in rare cases, result in threatened legal action.
This is only an issue if you work with a lender who is not regulated, and you should check that your lender is regulated on the OLA website or SEC register before engaging with them. However, many cases have been of phishing scams and advance fee loan schemes. These can be stressful and result in you losing money.