Payday loans are becoming one of the most popular financial choices to cover various unexpected costs, urgent payments, and meet emergencies.
Taking out payday loans in Ireland might seem a convenient option. But these loans are not always considered an ideal pick to provide money solutions. Moreover, when you need immediate money during a financial pinch, it is one of the helpful choices.
Imagine you are short of money because you covered an unexpected cost of a broken car or paid hefty medical bills right after receiving the paycheck for this month.
Now all your money flew after meeting this unavoidable expense. But you have an entire month, and you have not bought the groceries, paid utility bills, and minimum payments for your credit cards.
What will you do? Apply for a loan? Nope as it takes a while to get approved. Will you use your credit card? No, as you have already crossed its limit. Here, the only instant financial solution for your current circumstances is payday loans.
What are payday loans? What are the associated pros and cons?
There is no fixed definition of a payday loan. It is a short-term loan which is provided to individuals when they need access to money instantly. These loans are generally offered at a high-interest rate which is necessary to pay back on the next paycheck day.
The amount of the loan highly depends on your pay as the lender might not give a sum of money exceeding your paycheck.
As with any other loan option, these loans have pros and cons. If you are thinking of taking payday loans, consider knowing their advantages and disadvantages before reaching out to any lenders.
Here are some of the most significant advantages of payday loans.
Ease of access
The most beneficial feature of this loan is its ease of access and convenience of taking it out. You can apply for it online, and within a couple of minutes, the requested money will be credited to your accounts.
This quickness is what people prefer the most to cover the unexpected costs.
Payday loans appeal to many borrowers as the eligibility criteria are very simple. Unlike other lending institutes where the acceptance standards are too stringent, many borrowers face rejections on their loan applications due to that.
Even with a low score and bad financial history, anybody can get approval on these loan requests.
You are not required to pledge your asset for taking out this loan. Many reputed financial institutions ask you to put your car, home, or precious assets as collateral for approving the loan.
Payday loans are generally unsecured ones where you are not supposed to put any of your assets at risk.
Approval with poor ratings
As already mentioned, if you have a bad credit score,then you are still eligible for this loan. You can still get approval on your loan even with poor credit ratings.
Below are some of the major cons of payday loans.
Before applying for it, you should know that payday loans are very expensive and can lead to a debt cycle.
The interest rate applied on this loan is very high, which can burden you down financially. Therefore, ensure that you know what you are signing for.
Many people consider a payday loan predatory because it vultures on individuals with less income with poor credit ratings. Many lenders have become notorious as they have a corrupt past in the method of collecting debts from borrowers.
Before opting for this borrowing, make sure that you partner with a reliable lender.
Caught in a debt trap
If you fail to keep your repayment for this loan, there is a high chance of getting into a debt trap. Because the rate of interest charged on this loan is very high, it keeps rolling on and on if you don’t pay it within the predetermined tenure, i.e. your next paycheck day.
Some lenders might provide an extension on your loan term if you make them understand your financial circumstances. But make sure that you repay the borrowed money with interest.
Questionable debt collection
As mentioned earlier, many lenders are deceitful as their method of debt collection is highly questionable. Some even threaten borrowers to take out the money they have lent.
But nowadays, FCA (financial conduct authority) takes careful measures in this industry, but the reputation of some lenders is still stained. Make sure that you do the lending business with a credible lender.
Any person can fall prey to financial pitfalls, particularly when the month is going to end. Your car battery might require a quick replacement, or your reliable AC may stop working in the middle of the scorching summer.
In such scenarios, you cannot avoid the money from flowing outwards. Here you don’t have a choice but to seek financial help from outside.
A payday loan in Ireland comes with the most significant advantage of providing quick access to the needed funds. That is why people take this option without further ado.
But if you are already living paycheck to paycheck, it will be tough for you to pay back the borrowed money after covering the necessary expenses.
Ideally, every individual should build an emergency fund to cover unforeseen expenditures. However, if you lack one, you might also have a valid reason for that.
You should not even ask your family and friends for money help as it is not fair on your part to put a financial burden on them. Here you will have to rely on a money source that provides help on flexible terms.
We cannot deny that payday loans are a quick and convenient way to arrange funds. But as with any other loan product, these also consist of their own pros and cons.