Why do people choose payday loans?

Before understanding the reasons for people choosing payday loans it is important to know the true meaning of payday loans. A payday loan is short-term borrowing, considering it a loan or credit based on the borrower’s earning. The interest rate on a payday loan is on the higher side as it is provided immediately. It is also known as cash advance loan. The repayment of a payday loan as its name suggests is due on the payday of the borrower or near the payday, it does work as a facility in times of need. It can be obtained from any credit lender like banks, private credit merchants or online credit providers.

How does it work?

There are different regulations in different States and functions accordingly. The laws decide the amount of borrowing, the fees and interest rate lenders can charge on the payday loans. To apply, there are high chances of providing a pay stub by the borrower to acquire a payday loan as it is based on it. After the approval, the lender provides cash, cheque or direct deposit into the borrower’s account. Usually, the repayment time is of two weeks or by the next payday and a full principal amount along with the interest has to be paid.

Reasons for choosing Payday loans

Although a payday loan is an expensive method of obtaining credit, it raises finance quickly than any other way and helps in paying for expenses like bills or other miscellaneous expenses without compromising on the credit score. It is a loan that is valid for a few weeks and saves the penalties on late payment. Few benefits attract borrowers towards payday loans.

  1. The access to payday loans is almost instant as applications are approved immediately by the lenders due to high competition if the necessary information is provided correctly. Some lenders process the application exactly at that moment and provide a loan on the same day or the following day that is quicker than any other conventional loan or credit card.
  2. A payday loan requires minimal or no paperwork as the process of obtaining a payday loan is very convenient. It does not require booking an appointment with the loan officer, waiting for a response or submitting loads of paper. It is applied online and instant feedback is received by the lenders as the loan is received in a cash form it makes it more advantageous over conventional loans that are specific or credit cards that limit the spending.
  3. Conventional loans and credit cards require many proofs, documents, and collateral requirements to qualify for the loan whereas payday loans need only proof of income. The current financial position of a borrower is more important than credit score or rating and even with a bad credit rating payday loan can be lent. Only a stable income and ability to pay loan back matters in a payday loan.
  4. As payday loans depend on the income, therefore, the amount of borrowing is limited to that and the abiding laws in the State. However, good repaying behavior can enable borrowers for higher amounts.
  5. It is very unlikely that a payday loan hurts the credit rating or credit score of a borrower as it is a short-term loan and must be paid within weeks. In instances of credit cards and conventional loans, the period is lengthy and filled with uncertainties that can damage the credit rating.  

Alternative ways to pay your bills

Importance of paying bills at time

Paying bills is an essential responsibility that needs to be practiced as it can affect your credit rating and late payment penalties can be hectic and can leave you in debt and stress. Paying bills on time can help in boosting credit rating, save money, help in obtaining lower-interest loans and improve credit score as its major factor depends on timely payments.

Some ways can help and enable you in preventing late payments and understand the importance of paying bills on time.

Organize bills according to its importance and due date. Certain payments can be deferred like a gym membership, subscription or rent (in some cases) but utility bills and repaying debt must be organized and kept on top priority. It can be achieved by using a calendar and marking paying dates on it or setting reminders on the phone.  

Automating payment of bills is a stress-free method that can be practiced as many bills are recurring and frequent like loan installments, mortgage or utilities. Banks offer automatic deduction from the account to facilitate its customers.

Consolidating bills is another form of saving time and protecting from late payments. Services like the internet, phone and TV cable are mostly provided by the same service provider and consolidating the bill into one will be highly beneficial and there will unlikely be any chance of missing the due date.

Placing bills here and there can aid in late payments and extra charges, therefore it is necessary to organize it and place the bills in one place and ensure the location is visible for you.

Methods of paying bills

With changing times, trends have also changed and paying bills is no exception. People have found alternative ways to pay bills instead of cash. Methods like paying from credit or debit cards, loyalty program points, gift cards, and virtual wallets.

It is more convenient for customers to pay with any of these methods as it is quicker, seamless and hassle-free.

Paying through cards has allowed you to shop easily due to its feature of online payment and paying bills online. Carrying cash around is unsafe and more stressful as it wastes time in counting and adds unnecessary burdens. Cards are safer as they can be blocked when lost or stolen.

Virtual wallets may be a new addition and it is much more convenient and safe than any other method as it works in all major transactions. Apple Pay, PayPal and Amazon Pay are its examples and these can be connected with your bank account for making payments. This method of paying bills and expenses has eliminated the fear of theft and loss as it is multi-layered protected.

Phone banking and paying bills through their application is another method. It is easy, quick and convenient and in a few clicks bills are paid.

Loyalty program points and gift cards also allow you to shop particularly in specific malls and stores without paying money as points are deducted after using it for shopping bills. Gift cards are worth amounts that are redeemable at stores allowing consumers to shop conveniently.