One of the most commonly-asked questions these days on the subject of personal finance is that of whether or not payday loans really are all they’re cracked up to be.
Never has a whole area of personal finance faced such harsh scrutiny and criticism than is the case with payday loans – a service critics would like to see wiped off the face of the Earth once and for all. But at the same time, there are those that swear by these instant-access loans as quite simply the only solution to a thousand and one genuine financial hiccups.
In which case, where does the truth for payday loans lie?
Payday Loans – Advocate Arguments.
Well, the biggest supportive argument voiced by advocates is that of ease of access – as in how quickly you can get cash when you need it. If an unexpected bill comes up two days prior to payday, they insist that being able to pay it with a payday loan represents a much more sensible option than facing penalty fees and credit score damage owing to late payment.
In addition, they also argue that when and where a payday loan is paid back in accordance with the terms by which it way allocated, fees and charges are in no way extortionate. An APR over 1000% makes for scary reading, but when a loan is paid back within a week or two, annual rates of interest have no bearing. More often than not, the amount of interest actually paid over the space of a couple of weeks is more around the 25% mark, which is of course far less dramatic.
And as most payday lenders don’t take credit scores into account, their services are open to the widest possible audiences and allocated more openly/fairly.
Payday Loans – Critics’ Arguments.
On the reverse side of the coin, critics argue that payday lenders specifically target those who are wholly unlikely to stick to the terms of the loan agreement, in order to then jack up the interest and the amount owed exponentially. It’s not uncommon for the smallest of three-figure loans to earn four-figure interest charges in no time at all, resulting in those already in financial trouble ending up drowning in debt and despair.
The fact that payday loans are available pretty much to anyone across the board regardless of financial history and current circumstances makes them an easy and obvious target for abusers, who carelessly take out the loans and play right into the hands of unscrupulous lenders. The fact that so many target the elderly and those on benefits specifically illustrates the problem quite clearly, so argue critics of the practice.
To label payday loans ‘right’ or ‘wrong’ would be unfair and less than objective to say the least, as while there are indeed huge risks attached in certain instances, it all depends on how such services are approached and used. If unsure, it’s always worth speaking to an independent expert before going ahead with any personal loan application, though in all instances it is never, ever a good idea to use any kind of debt to pay off existing debt.