We can all find reasons not to take out a payday loan or utilize a credit card when we are faced with a financial emergency or unexpected cost but when used responsibly, these other sources of income can be beneficial during the right circumstances.
Although payday loans get a bad rap for charging ultra high interest rates and putting borrowers into a supposed debt trap, these short-term, short-dollar loans have actually benefited many people over the years. A recent Pew Charitable Trusts study found that a majority of consumers who take out payday loans find them to be convenient and easy to obtain for the purpose of providing quick cash.
Payday loans are a simple option for those who have encountered credit score problems. Payday lenders don’t typically run an applicant’s credit score which makes the likelihood of someone getting approved much greater. While a payday loan is not for everyone, in that some won’t be able to payday it back right away, there are many consumers out there who can handle borrowing this way.
It’s not all scrutiny for the payday loan industry
Credit cards are another borrowing option that has seen much scrutiny in the past two decades. Rightly so! Give the wrong person a $10,000 limit on their spending and you may be asking for trouble. On the flip side of the plastic, for those who are capable of using credit cards in a responsible fashion, this type of borrowing can be beneficial.
The upside to payday loans and credit cards can be seen in a variety of ways as the privilege of short-term borrowing pervades our society and affects most everyone is some sort of way:
*Convenience- Payday loans can be applied for online from the comfort of one’s home. All information is passed electronically and the money is deposited right into the borrower’s bank account. Credit cards are immediate and don’t require someone to carry around cash.
*Peace of mind- A payday loan can provide cash in desperate times while giving someone the peace of mind that their financial emergency is taken care of. Credit cards give a person peace of mind knowing they have backup financing should their be a car breakdown or unanticipated financial cost.
*Credit history- Most payday loan lenders don’t worry about a borrower’s credit score which makes it easier to get a loan. If a consumer defaults, the lender doesn’t typically report to the credit bureaus unless the loan is sold to a third part collector. Credit card companies will check your credit when you apply but if you are responsible, your credit score will greatly benefit by your making your payments on time and in the right amount.
Payday loans and credit cards provide consumers with a way to get the cash they need, when they need it, but if the debtor is not responsible, financial danger may lay ahead. Consider the pro’s and cons of borrowing this way before you take the credit plunge. Lending Leaves advocates for responsible lending and encourages consumers to think twice before borrowing.