Could it be said that a payday loan is a savior, as it is the easiest and fastest way to borrow money from a lender in a tight situation. Or would a payday loan be considered a curse due to the fact that a payday loan usually leaves the borrower’s paycheck less and thus a borrower would continue the cycle taking out another payday loan for the next payday to cover the fact that this payday that person pawned in his or her paycheck and unless a miracle happens the cycle continues on and on till the borrower is buried in interest and in debt.
What are the pros of this kind of loan? Hard to believe but there are actually some. During emergency situations this type of loans is the easiest to acquire, usually the only thing needed is the latest payslip as proof of your salary. With the only a few hours of processing one could take out a loan especially if the situation calls for immediate cash. Unexpected expenditures are a part of life, and a payday loan is a simple answer to that although a borrower should always think twice if the said expenditures are actually needed since the interest and financial repercussions are grave.
A payday loan will also bring immediate relief to the needs of the borrower it will be short lived. In fact, anyone can say that it would be a short term relief as the problems of being financially short will recur as soon as the next payday comes about.
Pawning in your paycheck so to speak can be a recurring problem plus a substantial amount of interest above the paycheck since it is very seldom that the interest will be taken off the principal cash released to the borrower and usually it would be charged on the payment date, over the paycheck, unless that the borrower has enough surplus to pay the interest and live off the said surplus till the next payday. Chances the borrower would have to take out another payday loan to survive till the next payday.
As this is already a problem for the borrower, and the cycle of debt continues. Some borrowers even would compound their problems by pawning in their paycheck to multiple lenders come payday the problems are compounded because the money and interest is far above the value of the actual paycheck. And thus the next paycheck is already allotted for one loan and the next one to the next and so on and so forth.
With compounded interest the borrower has to take a larger amount to cover the compounded loan. In which case would also be hard for the borrower since his or her line of credit is greatly tarnished and would have a very hard time to take out another loan from any other financial institution.
In emergency situations it will always be better to have an actual emergency fund rather than having to resort to a payday loan, worse comes to worse there is always that. But as the old saying goes “Let the buyer beware.” Or in this case the borrower.