The Advantages and Disadvantages


Payday loans can be a useful tool for borrowing a small amount of money for a short amount of time. When used correctly and with good intent, you can have a positive experience with a payday loan that will yield the results for which you set out. Although payday loans may sound appealing, the truth is that for years now, the payday loan has been the subject of various controversies. Payday loans, in fact, live in infamy for destroying people’s finances and launching them into a frightening amount of debt. Due to many borrowers misusing and misunderstanding payday loans, it is important as a potential customer that you know both the advantages and disadvantages to these types of loans.


- Provide an option when there are no others. If you find yourself facing a financial problem and you have no other solution than a loan that will cover you until your next paycheck, a payday loan might be a good option for you to consider.

- Easy to obtain. These loans do not require a credit check or for you to have access to credit cards. US citizens eighteen years or older with a monthly salary, driver’s license and access to a checking or savings account are eligible for a payday loan.

- Fast and convenient. These loans provide the convenience of applying online and cancelling out the hassles of filling out all of the paperwork that comes with traditional loans. After submitting your application through a payday lender’s website, you will be approved shortly after and the funds will be deposited into your account within a few hours or days.


- More expensive than other loans. The interest on payday loans can range between 300 and 900 percent. Remember that this is a short term loan and then compare that to the average 12% APR on a credit card and you will realize just how expensive these loans really are. Because of the large costs associated with payday loans it can be difficult to get out of them, and it is important to pay your debt by the date of maturation. If you find that you are unable to pay back your loan under the short-term terms, you could be facing an interest rate that continues to climb higher and higher.

- Easy to fall into a vicious cycle. A large part of the profit made by the payday loan companies comes from consumers who cannot repay previous loans on the due date and therefore end up extending their loans. This results in more fees for the customer added on top of the original amount borrowed which then can lead to extreme debt.

- Deception by lenders. Companies that specialize in lending money in the form of payday loans can sometimes be deceptive in the information they disclose. Taking advantage of the fact that it is difficult for most borrowers to legally defend themselves, the payday lenders often use misleading marketing material and find loopholes in contracts with their customers.