A payday loan can help you meet a temporary cash crunch. And probably that’s why they are so popular. Living on paycheck poses certain challenges, and at times a situation arises where you can’t wait for the next pay. You need cash immediately and during such times you can handle the situation easily with a payday loan. However, useful as payday loan is, it is not without limitations.
However, don’t blindly apply for a payday loan. Before you submit an application, consider the pros and cons of payday loan provided by Financial Directory, the Legal Money Lenders in Singapore.
However, before we look at the benefits and risks associated with this loan, let’s see its eligibility criteria.
Typically, this loan is available to everyone who’s employed. The maximum amount you can borrow depends on your salary, and to some extent, on your present financial situation.
While some believe that lenders check borrowers’ credit history before approving payday loan, that is actually not the case.
There’s no fixed interest rate for a payday loan. The interest rate varies from lender to lender and also depends on your salary and current financial situation. That is why, if it is possible, you should shop around a bit to get the best possible deal.
The biggest advantage of payday loan is that it allows you to meet a financial emergency quickly. Unlike bank loans, payday loans are processed very quickly. Sometimes funds become available within a few hours after the submission of the loan application.
Apart from giving you quick access to funds, payday loan allows you deal with a financial emergency discreetly. You don’t have to call up your friends or family members and ask for financial help, which can be a little embarrassing.
You don’t have to submit any security. That is, this type of loan doesn’t have any collateral requirement. You can get a payday loan even if your credit history is not up to the mark. Money lenders don’t usually check borrowers’ credit record before handing out a payday loan. You only need to submit a proof of your employment and a copy of your current salary slip.
A payday loan is for a short-term financial issue. It is not a good cover for any long-term financial problem. Also, this type loan should be used once in a while. Taking a payday loan almost every month reflects poor finance management or a habit of living on credit, and both can have serious consequences in the long run.
As payday loan doesn’t need any collateral or an impressive credit history, the rate of interest is quite high. In case you use them carelessly, you can feel yourself burdened with a loan with a very high-interest rate.
Payday loan affects your credit score if you don’t repay on time. Some licensed money lenders offer payday loan without checking credit history, but if you are late in repaying the loan or become a defaulter, your credit score can become badly affected, which in turn can make it extremely difficult for you to take a bank loan in future.