Payday Loans – Should you get one or not?

​A payday loan is a cash advance that you can secure against your next paycheck. Primarily, payday loans are given by third party lenders who are not your bank. There are many payday loan lenders that interested people can contact including many that are found online. Ideally, payday loans are used to cater for emergencies. Payday (SMS) loans have pros and cons.

Pros of SMS loans

Unlike other loans, payday loans are very easy to access. There is very minimal paperwork involved and applicants can apply for the loan online. Applications are not taken through a rigorous credit check, and so clients can get their money as soon as possible.

Apart from not conducting a credit check on the borrower, payday loans lenders do not demand any collateral. Many people may not have enough assets to submit as leverage when they want to secure other kinds of loans. When faced with an emergency, such people will opt to get a payday loan instead of borrowing from their bank.

Once a borrower is done with the application for the payday loan, it does not take very long before they have the money in their account. Bank loans can take very long before they are ready to be withdrawn from your account. Borrowers can get the payday loan in their account within a day or as soon as an hour after approval.

Borrowers can gradually increase the amounts of money they can borrow. Regular borrowers who pay back their payday loan in time enhance their chances of getting higher loans in future. It is reassuring to know that there is a place you can easily get money when you are facing an emergency late in the month, before getting your next paycheck.

Cons of SMS Loans

Payday lenders apply higher interest rates unlike other lenders like banks and building societies. Financial experts even suggest that it is better to get an overdraft as opposed to applying for a payday loan. Payday lenders charge exorbitant high annual interest rates.

Borrowers who fail to pay their payday loan in time face penalties of up to $100. Every loan that is not paid is rolled over to the next month, and a new interest rate is applied. In a case where the borrower is not able to pay up in a couple of months, he or she may end up owing the lender thousands of dollars. Although payday loan lenders do not check your credit rating to give you a loan, failure to pay up your payday loan will reflect on your credit rating.

SMS Lending is popular in Europe as well

Quick personal loans like these have become very popular in Europe as well, especially in some Scandinavian countries like Sweden and Finland. If you’re interested in knowing more, you can visit SMSLån123.se to see what interest rates (or räntor, like they say in Swedish), they are offering over there.

The bottom line is this: try to avoid payday (SMS) loans if at all possible – only get one if you’re in an emergency, and you feel like you have to.

– Useful resource: http://www.consumerfinance.gov/

Federal regulators are setting new rules for banks that offer deposit advances.

Problems You Can Face when Paying Back a Payday Loan

Key-Payday-LoansMany people need extra money, apart from the salary. They use payday loans to cover the need of money more frequently than long-term loans.

A payday loan is also known as a salary loan, a payday advance, a payroll loan or a cash advance loan and it’s a short-term unsecured loan.

This type of loan can also be about a prearranged line of credit such a credit card, and the loan relies on the fact that the consumer has a previous payroll and employment records.

Now, if you have this type of loan, and you have problems paying it back, or if you think that the lender treated you unfair, there are certain ways to work around this issue.

Let’s see how you can pay back the payday loan quickly.


When You Can’t Pay Back

When you can’t find the right solution for paying back a payday loan, you can’t ignore this situation. You don’t need to panic, but it’s necessary to take some steps for solving the issue.

First of all, you need to contact the lender and ask for a solution. They are kept by the laws to help you find the best way that works for you. It can include freezing the interest or suspending the charges; they can interrupt the recovery of the debt for a reasonable time if you go with a repayment plan, and they also need to direct you to free sources for debt advice.

Keep in mind that no matter how difficult your financial situation is, they are not allowed to bombard you with multiple phone calls a day, text messages or emails.


Canceling the Recurring Payment

Many clients choose the recurring payment instead of paying when they have the money. If you don’t have enough to pay your mortgage or for your bills, it is possible to ask the lender to cancel the recurring payment option.

The truth is that it’s just a temporary solution because the recurring payment has plenty of benefits. If you cancel it, you will have money for paying your bills or your mortgage, but keep in mind that you will also have to give the money back to the payday loan.


No Roll Over

The procedure of using this option is appealing to the lenders, but it is not so appealing to the clients. If the financial institution calls you and suggests you to “roll over” the loan for another month, the best thing to do is to say no.

instant-payday-loanThe reason is very clear – using this option will make you take out more money from your pocket. You won’t be able to close the loan, but the money spent on the interest rate will increase, and you will have to pay back more money.


Debt Advisor

If you struggle with your financial situation, the best thing to do is find an excellent financial advisor and ask for help. There are plenty of financial institutions who offer this types of services, and even if you have to pay a fee, the results will be amazing.

With the help of a financial advisor, you will be able to create a payment plan for all your debts and even improve your financial situation. They know all the rules of the system, and they can say exactly what steps you need to take to have fewer debts and get a better situation for your money.