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 Bank loans can take very long before they are ready to be withdrawn from your account.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/