Timing is often so important with your finances. It can mean a sizable difference in a bill, which is why the speedy turnaround of a payday loan is often very beneficial.
Critics of payday loans usually focus on the high interest rate, which is far greater than even the interest on credit cards. This is because payday loans are designed to be short-term loans for just two to four weeks instead of an ongoing loan like credit cards or more traditional loans.
The reason borrowers are willing to pay the higher interest rate is because the interest isn’t a lot when the loan is only for a few weeks and payday loans are quick, convenient and easy to obtain. In fact, most people can get the money deposited directly into their bank accounts the next business day after applying for the payday loan.
Direct deposit is another way that payday loans speed up the availability of funds to people. Many banks no longer allow funds to be available on checks that are deposited into an account until the next business day. However, direct deposits are available on the business day that they are completed.
This speed factor in payday loans is what makes them beneficial in many cases. A common example is taking out a payday loan to avoid a late fee on a bill that would be larger than the interest on the payday loan.
Of course, this benefit is nullified if the payday loan isn’t paid in full when it is due since this would mean more high-interest charges that can add up quickly.
People also use payday loans to keep from being overdraft on a bank account. Banks will charge a fee for each transaction done that overdrafts the account. A payday loan could be made to cover all the transactions and will charge only one fee.
Use payday loan to pay cash up front and save money
One way that people can take advantage of a payday loan that is often overlooked is when paying for a service, some places will give a discount for paying cash up front. If you don’t have the cash, you can get a payday loan to get the cash to pay up front.
This would only make sense if the discount on the service is greater than the amount of interest on the payday loan. Also, you would need to be able to pay off the loan in full on time to avoid being charged even more interest.
In most cases, it would be better to use a credit card to pay for something instead of a payday loan. This is because you can pay off the charge at the end of the month and it won’t cost you any interest at all. If you can’t pay it off by the end of the month, the monthly interest will be lower than the interest on a payday loan.
When you are looking into getting a payday loan, always consider every alternative and add up the actual costs. Go with the alternative that will cost you the least so you don’t end up with a pile of debt.