Consumers daily have one need or another they are trying to meet. We try to borrow from family and friends which ends up not working. Then the idea of borrowing comes to mind and this is where getting a loan on the day takes effect. This is seen as an easy way out of whatever form of emergency we find ourselves in.
Loan on the day or payday loan as some may call it, is usually known as a fast and easy solution to borrowing money. It is a small amount with a short repayment term.
The essence is to cover for little expenses that arise before you get paid. This type of borrowing has its upsides as you tend to repay in a single huge sum when due, but it is not convenient for everyone.
Although they are easy to access even with bad credit scores, they sometimes come with high interest rates. These rates could be a discouraging factor but the urgent need for it makes you still apply for the loan.
This article will address how this type of loan works also the pros and cons of getting it. So, before taking that bold step, go through the details of this article.
How Loan on the Day Works
One major reason why a lot of people apply for this loan is that it is a straightforward process that doesn’t involve many protocols unlike other types. Once your application has been approved by the lender, the funds get deposited into your account immediately. Sometimes the lender will give a prepaid cash card but this could come with extra charges to activate before using.
How You Can Qualify for a Loan on a Day
For you to be eligible for an instant loan is quite easy. All that you need is to have an account that is functional because the lenders will need it to prove that the person receiving the money has a means of identification. This though is one of the basic requirements of every financial institution but payday lenders sometimes do not pay attention to other details.
Pros
Payday loan is of great advantage to a lot of individuals. It has helped them to be able to solve their financial problem and still continue with their day to day activities. Now that we know how to qualify for the loan, below are some of the advantages what we are going to briefly discuss that will guide us on what next to do.
Easy Accessibility
One of the advantages of why borrowers consider this type of borrowing is because it is accessible and convenient. The process could take only a few minutes before the money gets into your account. This is what many people are searching for as it covers emergency costs. In addition, lenders give offers for products which makes them even easier to access.
It is Unsecured
Loans on the day are considered a form of unsecured debt unlike auto loans or mortgages. These are lån uten sikkerhet på dagen (loans without collateral on the day) because they do not need borrowers to stake their houses, cars, or valuable assets. Which means your property or asset is not at any form of risk.
Fewer Requirements are Needed
What also attracts people to this type is that the criteria are less strict. That is why borrowers with bad credit scores and low income can get approval despite the fact they do not meet the criteria. The information needed to apply for this type of loan is basic information like name, date of birth, address, age, etc.
You Can Get Approval with a Bad Credit Score
Applying to borrow money with a bad credit rating does not matter. The lenders are most times not interested in your past credit history. Sometimes they just need a form of identification and proof of income to approve the loan. They are more concerned about how affordable is it to you at the moment.
Lender Choice
Lots of lenders provide borrowers with several options to choose from which makes it all the more flexible. Borrowers tend to rush it as they do not need to secure their loan with anything. There are varieties of options at your disposal which does not put a constraint or restriction on what you can apply for.
Cons
Although a loan on the day is fast and convenient, it sometimes comes with some drawbacks which we shall discuss shortly. This simply means it is not suitable for every borrower. It could also make it difficult to improve your financial situation. Below are some of the disadvantages.
They are Quite Expensive
Loan on the day is sometimes termed as expensive because of the huge rates that apply to them. This makes the total amount being borrowed to become difficult to repay before the repayment period expires. Therefore, many borrowers try to avoid it.
You Could Easily Get Stuck in a Debt Cycle
When you fail to repay your debt on time, you could get stuck in a debt spiral. At this point, you find yourself borrowing again to be able to pay back the initial debt putting yourself in a tight financial mix. Due to the high interest that usually comes with refinancing your debt, you could end up getting into a debt trap.
It is Targeted at Minority and Low-Income Populations
People who tend to have more access to this type of loan are those whose monthly incomes are low and also those whose earnings are below average. It is not open to business owners or those who want to use the money as startup capital for a business. Therefore, those who need a huge amount of money cannot use it as it is to their disadvantage.
It Can Lead to Regret
Taking the loan could put you in a position where you begin to regret why you borrowed the money in the first place. This regret could be a result of some things you were not aware of initially before applying for it. It could also leave you in a state worse than when you hadn’t collected the money. You find yourself trying to refinance your loans over and over again and interest keeps building.
Repayment Period is Short
The duration when this loan has to be paid back is always between 2 – 14 days. Therefore, you may have to seek other alternatives to clear the debt. You can click here to learn about alternatives to payday loans. This could be challenging for someone who is facing financial difficulties.
Having Access to Your Bank Account
When you want to apply for advance cash, some lenders often request for information that gives them direct access to your bank account. This includes your full name, account number, bank name, etc. They do this to recover their money directly from your account when you fail to repay when due.
You Can be Sued for Money Owed
Loan on the day lenders can take you to court when you fail to pay your debt over a long time. They do so to be able to get their money. Some use it as a threat to ensure that you pay on time. As one who doesn’t want their image to be tarnished, you will prefer not to take the loan at all.
You Could Get Scammed
There are scammers everywhere and some are disguised as payday loan lenders. They tend to ask for certain personal information that shouldn’t be disclosed to anyone. To identify scammers, check lender whose site is indicating insecure and who asks you to pay a fee before you can apply.
Furthermore, to avoid being scammed, ensure that the lender discloses any added cost or any extra fee. If none of this is made known, this is a red flag that you are about to be scammed. Also, you need to review their agreement terms before agreeing so as not to fall victim.
They are Considered Predatory
Loans on the day are termed predatory because they tend to have misleading, unfair, or unaffordable terms that could trap the users in a debt cycle. Also, they could have high repayment cost that tends to escalate very fast. Escalate in the sense that they could cause your debt to keep accumulating extra fees which could trap you in a cycle of debt in the long run.
It Does not Help you Build Your Credit Score
There are credit bureaus that are in charge of gathering reports and information about borrower’s credit history. These lenders report to the bureaus to help them check the history of their customers. You can visit https://www.worldbank.org/ to learn more about credit bureaus. This will let them know if the person is creditworthy or not.
The majority of these payday lenders do not report to them so they won’t be able to provide any information about your credit history. This, in turn, affects your credit score even if you have been repaying your debts on time. Therefore, when you try applying with a new lender different from the one you used before, you do not have access to a reasonable amount on the first application.
Conclusion
Getting a loan on the day can be easy to come by to settle whatever financial situation you may find yourself in. At the same time, it could also be detrimental if you don’t take note of certain things. Thankfully this article has been able to explain how it works and also highlight some of the advantages and disadvantages that come with it.