Advantages and Disadvantages of a Payday Loan
There are times where emergency spending happens. These emergency spending may be in the form of medication, check-ups, minor car or home repairs, or other small purchases that address our family’s needs. These small spending may be addressed by getting a small amount of loan to cover for the shortage of income versus the expenses.
The minimal amount loan that can be availed of is a payday loan. But what can these payday loans offer and what should a borrower watch out for? Here are a few advantages and disadvantages that can help decide if the payday loan is indeed the best option.
Advantages of a Payday Loan
- Payday loans are minimal and easy to avail of. Being a very lucrative business, a lot of businesses engage in payday lending. Payday lenders only require documents that are most probably at hand and does not require any special document to be provided.
- Credit score is not reviewed when availing of a payday loan. When applying for a payday loan in Singapore, the lender does not require that your credit score be reviewed. Submitting and validation of the information that you shared is already good enough for granting the loan as soon as everything checks out well.
- Payday Loans are Fast Options. Soon as you apply for a payday loan, it can be approved within the time frame of your application. As long as you have complete documentation and requirements, an approval will never be far from being received.
Disadvantages of a Payday Loan
- Short period for collection. Most loans are available with a minimum term of 12 months. Unlike any other loan, the payday loan is required to be paid within 20 days or the next payday whichever is shorter.
- Continues to affect credit scoring. Although your lender may not require to check your credit score, delinquent payments will push these lenders to resort to collection agencies who report these non-payments that affect your credit score.
Interest rates are very high. Payday loans are one of the kind of loans that require payment of a very high interest rate. Despite regulations that are being placed to ensure consumer protection, interest rates are very high for these types of loan. The annual percentage rate can soar up to 400%.