Explain the pros and cons of the payday loan system

Payday loans are made for those people who require the urgent need of cash in an emergency. If somebody needs cash immediately the idea for a payday loan is best in this situation. It is a short-term loan at a high-interest rate. You are asking to pay off the amount of loan as soon as you get your salary at the end of the month. These loans are built for your urgent need not to fulfill your big expenses like car and house. The amount of loan depends on the pay check size of an applicant. These loans are given to the people at high risk because they are unsecured loans so that the interest rate is also high. Lenders of payday loans singapore are famous with the name of loan shark because they impose a high-interest rate on a small amount.

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Pros of a payday loan: There are several benefits of payday loans along with certain risks. Some of these are:

  • When you are submitting your application for a payday loan it takes only half an hour. This process becomes simpler and shorter when you apply for the moan online. It doesn’t need so much paperwork and the process of applying is not complicated. You can apply for the loan anytime in a day online. After getting approval for the loan you can get the amount the same day. It means you don’t need to run around for money in any case of emergency.
  • Generally, the payday loans don’t need to check the credit before approval.it is a big advantage for the individuals whose history of credits is disqualified in the past for taking a loan. Your capability to repay the amount of loan depends on your current pay stub.

In the traditional loan system, banks require good credit in approval of the loan but in payday loan system credit score is not needed or may require only fewer points in approval.

  • It is a kind of unsecured loan that does not need any security deposit like in the traditional loan system. While it is not a secure loan so that lenders are sometimes allowed to access your bank account which is a kind of risk.

Cons of a payday loan:

Along with several benefits a payday loan has some drawbacks also: 

  • The interest rate of the payday loan is very high. Its actual rate of interest for different states is different but the common thing is they are very expensive.
  • The lenders sometimes trap you and they don’t check whether the borrower is able to do repayment or not. This kind of loan doesn’t help you in making credit.
  • Lenders generally targeted the low- income public sector forgiving debts.