Payday loans are short-term loans for applicants with bad credit looking to get out of a quick jam. If you’ve got bad credit and you do a quick internet search on solutions hundreds of payday loan providers will pop up. They don’t require a credit check and are fairly easy to qualify for, however, they do have a downside that needs to be taken into consideration.
The Downside to Using Payday Loans
Payday loans are quick, but they often come at a high price. Interest rates are through the roof and don’t change in accordance with your credit standing. They also have a short repayment period. If you don’t have the funds to return within 14 days, then you’re stuck paying an extension fee. This fee can be as much as $40 for every $100 you borrowed and only extends the loan another two weeks. Not to mention, this fee does not get applied to the principal or interest in the actual loan. So, if you can’t repay the loan for 2 months, that’s $160 in extension fees plus the interest and loan balance. This often gets individuals in a world of trouble.
A Better Alternative
Similar to payday loans, but a more flexible alternative are installment loans. You can get a fast cash loan from MaxLend within one business day. There are still minimal eligibility requirements. You must be 18 years old, have income that meets minimum standards, and a checking account in positive standing. There isn’t a credit check involved and interest rates, while high, is nowhere near as high a payday loans. Other perks include:
- Higher Payouts – Most payday loan providers can only give you $1,000, and if it’s your first time applying, chances are you won’t get much more than $200-$300. Depending on your emergency, this may not be enough to cover it. Installment loan providers give their customers more cash to work with. You could get as much as $1250 deposited into your account.
- Smaller Monthly Payments – If you manage to borrow $500 from a payday loan provider you’re expected to pay $500 plus the interest back in 14 days. Since you’re likely still recovering from that financial emergency, you may not have $500+ to pull from your budget at once and as you saw from above, extending the terms of the loan costs even more. Installment loans, on the other hand, give you more time to repay your loans meaning they can break the balance due up into smaller payments.
- Fewer Opportunities to Fall Into Debt – Payday loans can essentially set you up to end up in a pile of debt. You keep extending a loan too long, eventually, you’ve wasted hundreds of dollars and still have a bill on your hands. Not to mention the various bounced check fees from the lender’s attempt to withdraw funds. Installment loans are easier to manage. You have more time to repay them, each payment is being applied to the interest and principal balance, the monthly payments are small enough to fit in your budget, which means less out of pocket expenses and bounced check fees.
Taking out any sort of loan requires you to be responsible for managing and repaying it. There are certain types of loans, like payday loans, that sound great when you’re in a jam, but can actually end up hurting you in the end. Installment loans provide the same conveniences with a lot more perks. So, the next time you need cash fast, and you won’t be able to secure the funds within 14 days, you might consider looking for an installment loan instead.