Say you’re in trouble. You really need cash quickly to cover an emergency expense. Maybe your car broke down, or you need to have some dental work done. It happens! People oftentimes turn to payday loans or similar products in situations like this, but a personal loan might be a better option for the average person.
The Payday Loan Cycle
Payday loans are frequently used, as can be attested by the massive number of payday loan places in every town and city with any kind of population. They’re popular because the payday loan requirements to qualify are fairly negligible so almost anyone can get one. You usually just need a bank account, proof of income, and ID showing that you’re at least 18 years of age.
Taking out one payday loan isn’t that big a deal. Sure, you’ll have to pay the high fees, but it’s probably worth it if the situation is desperate enough to merit considering one. The real issue occurs when payday loan customers find that they can’t afford their living expenses and paying back the loan so they take out another. The next paycheck comes but the situation is the same, and they continue to take out payday loan after payday loan to continue scraping by, paying the high fees each time.
How Much do Payday Loans Really Cost?
These loans are no joke when it comes to fees. The average payday loan has an APR of 400%, which means you’ll pay four times the amount of the loan if you continue taking out loans for the span of a year.
Other Loan Types that Can Hurt Consumers
Payday loans aren’t the only loans that prey on people in their difficult moments. Title loans are also short-term loans with high fees, but they require that you put up a car title as collateral. You’ll also find lenders similar to the corner payday loan store on the internet, and though they offer quick, fast loans, they come with the same high fees and short terms.
What’s the Alternative?
Whether you’re looking for a way to help you make ends meet on a short-term basis or you need a little extra help getting off the payday loan carousel, a personal loan might be the answer to your financial problems. They aren’t nearly as difficult to obtain as people seem to think they are, and you don’t need collateral in order to qualify.
How Can a Personal Loan Help You Stop Taking Out Payday Loans?
It can allow you the extra cash you need to pay off the payday loan while paying your bills and meeting your other financial obligations. You’re able to pay back the loan over the course of years rather than weeks, which means smaller payments, plus the interest will cost you much less.
You may even be able to use the loan to get back on top of your finances, getting all your bills up to date so you can stop paying late fees and start building a positive credit history.
What If You Have Bad Credit?
A lot of people turn straight to payday loans because they think their credit isn’t so hot. If that’s the issue, the first thing you need to do is check your credit score. You may be surprised, but if it’s exactly as bad as you thought, that’s not a deal breaker. There are plenty of bad credit loans and easy approval personal loans that you’ll still qualify for. There are even loans that don’t require a credit check at all.
Are They Quick, Fast Loans?
People oftentimes don’t even think of getting a ‘real’ loan when they’re in a pinch because they think it will take too long, but that’s not necessarily true. You can generally get access to cash within a day, oftentimes even less.
Benefits and Downfalls of Personal Loans
There are pros and cons to any type of financial product, and easy approval personal loans are no exception. Here are a couple points that might help you make an objective decision.
- Lower interest rates mean you pay less
- Longer term for repayment means smaller payments
- Personal loans can build credit
- Fast access to money in an emergency
- May allow access to more money
- Longer term commitment
- Usually does report to credit agencies so missed payments will likely hurt your score
- In-person lenders might be harder to find than payday loan stores
- Usually requires more paperwork than payday loan
Are Payday Loans Ever a Better Option than a Personal Loan?
If you really only need money to get you to your next paycheck and will be able to pay it off and easily afford your living expenses, maybe a payday loan does make sense for you, but let’s get real. That’s rarely the case.
Once, payday loans might have been since your credit would have been negatively affected while shopping around for a loan. Any loan you were turned down for could hurt your credit, and simply applying for loans even dings it by creating a hard inquiry when the lender requests a copy of your credit history. Plus, who has time to wait for money in an emergency? However, that doesn’t have to be the case anymore.
Now, there are loans available that don’t even require a credit check, and easy approval personal loans are not uncommon at all. Plus, with the Loans Now Discovery Process, you can determine which personal loans you’ll qualify for before you apply, saving you time and points on your credit score.
Since it’s a free service and they only run your credit a maximum of one time to help you find the best loan possible, there’s very little to lose in trying out the Discovery Process. You’ll need to give the representative helping you out your credit score (which you’ve already checked if you’re considering a personal loan, right?) and you’ll need to calculate your debt-to-income ratio, plus some other information, and they’ll find the loan with the best terms based on your situation. You’re in no way obligated to purchase a loan product if the terms presented don’t work for you.
You’ll never know if an installment loan can get you off the payday loan carousel if you don’t give it a shot!