Payday Loan as Emergency Money: Benefits and Drawbacks

Payday loans have long been used in the US. Nowadays, payday loan is growing quickly in the UK. Payday loan is a short term loan payable in about two (2) weeks or one payday. Many people engage in this type of loan. As long as you are of a valid age, with a valid payroll account you can apply for payday loan.

Unlike short term loan, payday loan has a higher interest rate. In the UK, it reaches to almost 1,500 %, about 5 times higher than short term loan. Even with this interest rate people still rely on this because it is most likely to be called as emergency money.

Payday loan is a source of emergency money. But every type of loan has its drawbacks and benefits. Compared to some other type of loans, Payday loan is the most convenient to avail especially for employees who are earning less or their earning is not enough to sustain their needs and the needs of their family. Very easy to avail application is within reach.

Here’s a list of the Benefits and Drawbacks of availing a payday loan.

Benefit	Drawbacks
Easy to avail and easy application.	1. If you do not pay on time, the rate could double.
Very convenient for people who needs an urgent cash.	2. Lender auto debit your loan from your account with the interest.
Short period of time in processing.	3. Some online frauds are deceiving, that the borrower must check first the credibility of the lender.
When you apply, your personal banking information is secure.	4. Although interest rate is negotiable, it can be extremely high.
There are regulations that protect borrowers from lenders to avoid very high interest rates.	5. If you try to extend your loan, a higher interest would take effect making you pay higher interest.
You can use your money for anything. The loan has no restrictions.
Payday loan is flexible.
Can be used during emergencies.
Your limit for your loan is based on your pay check. So you will know that you will not exceed.
Interest rate is negotiable with the lender.

A borrower can benefit so much from payday loans, from easy application, convenient, safe, limited amount and being flexible. That is why it is very popular. In contrary, in every pros there is always a cons. Payday loans maybe very convenient and easy but it also offers high interest rate which sometimes draws borrowers to a bigger debt.

Regulations were established to protect the borrowers, but still there are deceptive lenders that entice borrowers in offering an extended loan. A borrower must be very vigilant with this issue, so as not to become a victim.

Payday loan is available anytime, can be applied through the internet. But because of this availability, a borrower can apply for loan anytime he wants. Also, because of this reason, there is a tendency that a borrower can be buried of debt if he is not careful.

Benefits and drawbacks were stated. So as a borrower, what would it be to you? Will you borrow a payday loan or will you try to save your money?

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