Should Payday Loans Be A Last Resort?
There is no doubt about it – a lot of people spread across many sectors believe that payday loans should not be considered as an option when strapped for cash. They believe that at the very worst case, payday loans should be the last resort for any individual. Is there any truth to this believe? Is there any basis for spreading this kind of mentality?
What is the nature of a payday loan anyway? We all know that payday loans are unique in the sense that they are meant to meet short term financial needs that have to be dealt with immediately. They are processed quickly and efficiently and can be the solution to and individual’s urgent financial needs.
One can apply for a payday loan by going to the web site of a payday loan provider. He merely needs to fill out the application form and then send it in. He then has to wait for the application to be approved within the day. Once approved, the cash from the payday loan will be ready in the borrower’s bank account by the next day, or several days at the latest.
So what makes a payday loan fast? If you would notice, when I was describing the process of applying for a payday loan, I merely mentioned going to a web site. So basically, everything is done electronically. There is no need to queue up physically at the bank or the credit union. Hours of your time will be saved by not having to do this.
Another reason a payday loan is processed so quickly is that there is not much that is required by way of documentation. For example, the basic documents that are needed are proof of capacity to pay the loan back and a current bank account. For the former, this is usually copies of the latest pay stubs. For the self-employed, bank statements would probably do. The current bank account documents are required because the account is where the money is to be deposited. It could also be the means by which the payday loan would be paid off.
So why do people think that payday loans should be the last resort? What are the negative things about payday loans? Well, perhaps the biggest thing would be the fact that they do come at a price that is relatively higher than other traditional loans. As a matter of fact, payday loan providers do not really charge interesting the same manner that providers of other loan types do. What payday loan companies do is to charge a fixed fee for a certain amount borrowed. For example, a person borrows £100. For this £100, the payday loan provider charges, say, £10. Indeed, if you compute this amount and translate it into interest, what happens is that the interest turns up to be very high.
For the convenience and ease that they bring, though, I think that payday loans are pretty much reasonable. That is why I don’t think that a payday loan should always be considered as a last resort. Perhaps it depends on each situation.
