Emergencies happen at any given moment and in various ways. It could be a medical emergency or paying your regular monthly subscriptions and bills.

Although banks and other financial institutions can offer some relief with their financial services, they might change their services based on the stability of the economy and the international market. They also take a while to approve applications and those with poor or bad credit rating get lower chances to get a loan from these sources.

A good way to get funds when emergency strikes are by approaching a licensed moneylender because they process applications faster and you can get the money faster.

What Are Payday Loans?

If you need money now and your salary is coming soon, you can get a payday loan.

Payday loans, as the name implies, is a short-term loan that should be paid for a short period of time: mainly when you get your next pay.

Although it is a secured type of loan, you do not need a guarantee to avail this loan. Banks, moneylenders, and financial institutions will be considering both income and persisting credit when assessing applications.

Payday loans also come with a high-interest rate as compared to personal loans, but it is approved immediately so it is perfect for those immediate bills.

How to Avail Payday Loans?

If you will be availing payday loans, here are the things you need to know to apply:

  • You must be 21 years old and older
  • You must show your documents highlighting your source of income, employment record and if you can present it, your credit history.
  • For those who are 6 months into their jobs, they need to show their appointment letter showing their employment.

Benefits of Payday Loans

  • Payday loans are very easy to apply and avail. Just like personal loans, simply apply online from a licensed moneylender’s website or call, and follow the instructions.
  • You do not need to present a lot of documents to apply. You only need your proof of income, IDs and why you are requesting a personal loan.
  • You do not need a collateral to apply for payday loans and it is perfect for those looking for a small amount for their loans. As a result, you do not need to show your credibility, financial capacity, and credit history when you apply.
  • If you have a low credit rating, you can still apply for this loan so long as you have a steady source of income.
  • Payday loans are perfect for reviving one’s credit rating. Since you only borrow for a short period of time and in a short amount, it is a low-risk service for the lender and the borrower. Simply pay on time and you are on your way of sorting out your credit rating.
  • If you pay on time, you can apply for a larger amount the next time you borrow.

Alternatives?

Considering its high-interest rate and short payment term, a payday loan may not be ideal for your needs even if it can be availed immediately depending on your needs. There are also moneylenders who may have higher interest rates for their payday loans and if you have a bad credit rating, you may not be able to avail it.

There are a lot of options available that are safer and more ideal for you to use.

  • Personal loans

Just like payday loans, personal loans are easy to apply and get because moneylenders can process your application within 24 hours and provide you the money in the same day. It is also cheaper than payday loans since it would only come with 4% interest rate per month and their standard fees.

Personal loans are also easier to pay because they can be paid for a longer period of time. They can be paid monthly based on what you can pay without giving you problems with your budget and not use your entire paycheck like payday loans. Moneylenders even tell you until when you need to pay off your debts and the amount you still have remaining in your bill.

Finally, you can borrow more money with a personal loan rather than a payday loan. Depending on your income, a personal loan can help you with larger expenses as compared to a payday loan.

  • Student, Renovation, Mortgage Loans

if you will use the money for specific things like education, home renovation or rent, you can avail of other types of loans. In this case, student, mortgage, and renovation loans come with smaller interest and fees. The reason for these low fees and interest is due to the fact the moneylender knows where you will use the money. Renovation loans are only offered for certain types of renovations, but they also come with low-interest rates and fees.

By comparison, payday loans do not give lenders ideas on where you will use the money aside from your next paycheck.

  • Credit Cards

Credit cards are a form of loans on its own because you can simply pay for whatever it is you need to pay without requiring an approval and pay it whenever you can. Although the interest is also high, you have more freedom on how much you can use especially if it is within your credit limit.

If you do not have a credit card and you only earn below $20,000, payday loans are your best bet. However, the amount will be limited since it will only be the amount of your next paycheck.

Final Thoughts

Just like other personal loans, payday loans need to be thought of carefully before you avail them. If you cannot manage your first one, it may cause you a lot of trouble in the long run because of its high-interest rate. You may also make more losses than expected.

Manage your loans wisely and only borrow from a licensed moneylender so you don’t have to worry about extra fees and other problems.