Should You Risk Your Paycheck For A Payday Loan?

Should You Risk Your Paycheck For A Payday Loan?

When you need cash quickly to handle an emergency, you should consider a payday loan which will not burden you as a typical loan would. The process of taking out one is super easy and fast thanks to the minimal documents needed and less stringent qualifications. From the sound of it, payday loans seem like an ideal solution for a lot of people. But, are they worth risking your paycheck?

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What Is a Payday Loan?

A payday loan is a short-term, unsecured loan suitable for those needing immediate financial funds. In order to get your application approved, you only need to meet the basic qualifications; employed with a fixed monthly income, have an active bank account, and are applying for a reasonable amount.

To apply from a money lender, you need to present a proof of employment, a payslip and a bank statement or your bank account information. Most payday loans are transferred instantly into your bank account once your application has been approved. Thus, you have the privilege of not having to wait for weeks like you usually would for conventional bank loans.

Once you receive your salary, you are obligated to repay the loan as soon as possible in the full amount you originally applied for within two to four weeks. If you exceed the repayment period, you will be charged with additional fees that can significantly increase the cost you need to pay later on.

The Pros of Taking out a Payday Loan 

Taking out a payday loan could benefit you in numerous ways, including:

  • You receive your cash instantly

    Taking out a loan from conventional banks can take weeks or more only to get a phone call at least whereas the process of getting a payday loan can be finished from A to Z  within 24 hours or less. That is why payday loans are the best option if you need money urgently.

  • Strictly regulated

    Most payday loan lenders are MAS licensed which means they are obligated to follow strict lending guidelines. If your lender ever charges you recklessly, you have the rights to make a report to the Ministry of Law. Plus, you don’t have to worry about your family’s safety or your property getting stained with red paint since licensed money lenders operate in a totally different way than loan sharks.

  • Credit scores are not strictly evaluated

    Conventional bank loans require you to have a good credit score in order for your application to be approved. Payday loans, on the other hand, won’t take your credit score into account. There are even cases where certain money lenders won’t even need you to provide your credit history during the application process.

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  • They are easily accessed

    You can get information on the qualifications and deals offered by licensed money lenders in Singapore easily by visiting their website page. Aside from that, the cash they provide can be accessed within 24 hours after your application handing in the cash or a direct transfer to your bank account.

  • They have fewer requirements than other loans

    Conventional bank loans usually require strict requirements to ensure your ability to repay the loan. However, applying for a payday only generally needs;

    1. Be at least 18 or 21 years old, depending on the lender
    2. Employed with a steady monthly income
    3. Have a government-issued ID or Social Security number
    4. Have an active bank account
  • Payday loans are unsecured

    Due to the small amount of money offered, collateral is not required for payday loans. Thus, if you experience complications in repaying the loan, you should have no fear in getting your asset seized by the lender.

The Cons of a Payday Loan

Conversely, payday loans can put a huge burden on your shoulders as well. The cons of taking out a payday loan include;

  • High-interest rates

    Basically, the usual interest rate you pay for other loans, are multiplied approximately 12 to 26 times.

    Interests are usually charged annually for many loans and credit accounts. However, the interest for payday loans are required to be paid within an extremely shorter period of time; two to four weeks, depending on your lender.

  • Possibility of a vicious financial cycle:

    This only applies to those who borrow more than they should have.This only applies to those who borrow more than they should have.

    Once you have paid the loan back using your whole paycheck, you will start experiencing financial constraints again in the middle of the month and ended up needing to take out another payday loan. Then you end up with financial constraints again making you borrow more and the cycle just goes on and on.

  • It can affect your credit score negatively

    Just because credit scores are not strictly evaluated during the application process doesn’t mean your lender will be forgiving when you default or make late repayments.

    Considering the high-interest rate of payday loans, they will most likely to impose a risk on your credit score since they will be harder to repay.

Should You Apply For A Payday Loan In Singapore

With a well-thought plan, payday loans can be very helpful in providing you financial aid. With a reckless plan, payday loans can be your nightmare in the long run.

As a conclusion, just like other loans, you must think carefully if payday loans are the right type of loan for you and are you confident in your ability to repay the loan fully on time. Once you have that figured out, you can start searching for a trustable payday lender.

The biggest bonus of payday loans is that they won’t check your credit history or even if they do, they won’t take your poor credit score into account. Also, they are fast and easy to acquire, as long as you meet the basic requirements.

With A1 Credit, you can get a one-on-one consultation with a professionally trained loan officer to make sure that your financial needs are prioritized and you are provided with the best loan plan that won’t send you into a spiral of debts.

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