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The Pros and Cons of Payday Loans

3 min read

Are payday loans good or bad? Well, it’s not quite that simple. Like any other type of loan, there are a lot of factors to consider, and they have some pretty great positive features and some negative ones.

Instead of trying to assign a label, read on to see if a payday loan is right for you.

Pro: Quick and easy

Payday loans like Speedy Cash can come through anywhere immediately upon approval of the application to 48 business hours later. These are fantastic loans when you’re really in a pinch and need money fast.

Pro: No credit checks

Checking your credit too frequently can negatively affect your credit. Taking out a payday loan won’t affect your credit, so you don’t have to worry about this step. It also means you’re often able to get a payday loan, even if your credit score is not so great.

Pro: One and done

Payday lenders make things easy: Borrow on day one, pay it back on the agreed-upon due date. That’s it. No payment plans, interest rates, or surprises. Once the loan is repaid, the transaction is complete.

Pro: Online

Nowadays, payday loans can be taken out completely online from the comfort of your own home. This makes acquiring a payday loan even easier and more convenient than ever.

Pro: Unsecured

You’re not putting that money against anything, like your house or car when taking out a payday loan. You also don’t need anyone to co-sign the loan, which could affect their credit if you have issues paying it back.

Pro: No interest

While there are some set fees to pay when taking out a payday loan, there are no additional charges for interest or fees after the fact, as long as the loan is paid back on time.

Pro: Manageable loan

The loan amounts are not very high, with the maximum amount coming in at about $1,500. This makes payday loans nice and manageable for most borrowers.

Con: Defaulting

If a borrower cannot pay back their loan, the interest rates can be very high. This can make it even more difficult to pay back the loan and square up with the lender.

How to overcome this drawback: Always plan to pay back the payday loan before taking it out. This will ensure that you don’t end up defaulting on the loan and having to pay all those annoying interest fees.

Con: Small amounts of money

Those small amounts come in handy if you’re looking for a small, manageable loan to deal with. But they can be kind of a downer if you need more cash on the spot.

How to overcome this drawback: If you know you’ll have the full amount by the deadline, you can easily take out more than one payday loan using a couple of different lenders. If you need a larger sum of cash and don’t think you can pay it back by the deadline, opt for a different type of loan.

Con: Debt loop

One of the things people get caught up in with payday loans is a payday loan loop or a debt loop. What happens is that people need to take out payday loans to pay their other payday loans, and over time these can add up.

How to overcome this drawback: It’s important to borrow only what you’ll be able to pay off, and try not to use these loans for things like rent, daily bills and groceries. Instead, use these loans when unexpected one-time bills and payments come in.