We live in a complex world – and the latest research indicates that more Americans are today living from paycheck to paycheck – and that levels of savings are far below established norms. The reasons for this are myriad but include the pressures that have been placed on savings and household income during the extended period f the global pandemic – and the fact that the cost of living has recently spiked dramatically. However, emergencies are a fact of life – and for borrowers that need a fast injection of funds, there are a variety of options. However, they all have their pros and cons.
For those with bad credit obtaining a loan from a traditional financial institution can be next to impossible. These loans are granted extremely quickly – usually within 24 hours and are mostly for small amounts – in many instances, those who are employed will simply be using an unsecured loan as a form of bridging finance between paychecks. The usual way that lenders of unsecured amounts operate is to ask the client to provide them with a check or debit details from their bank. Then installments are automatically deducted. Miss a payment and that check will be cashed or your account will simply be debited for the entire loan amount.
You’ll need to have a checking account in good standing, proof of income, and a valid form of identification. The provider of the loan will not conduct a credit check (on the downside, these sorts of loans do not positively affect your credit score – something you should always be trying to do so that you can move forward to other sorts of traditional finance).
This is one of the reasons that this type of loan can lead to long-term problems. It takes iron discipline to maintain a payment schedule – and many people who take out these loans often find them in a debt trap where the interest rates charged on the loan are difficult, if not impossible to allow for servicing of the loan. This is especially true when larger amounts are borrowed.
It is essential that the borrower think long and hard about how the loan monies will be spent. Buying new fishing gear or the monthly groceries are both not great ideas. However, if you are investing in an upgrade to a property, that makes much more sense as you are increasing the value of a fixed asset. That asset can then be leveraged to raise more funds.
But even with these caveats, there are some advantages to taking out a payday or short-term loan. Firstly the money is provided quickly – and in the case of an emergency that can make all the difference. Soem providers will even have the money available in as little as minutes – and many loan providers are open 24 hours a day, 7 days a week.
There’s also a minimum of red tape to negotiate – and once again that money can be available very quickly, without the need to inspect assets that would stand as sutey for other types of loans, a process that can be lengthy.
If you require a loan and time is of the essence then it is always preferable to find another source of cash. If it is a real emergency then this sort of loan is a viable option. However, never borrow more than you can comfortably afford to pay back with your next paycheck. If you have the discipline, these sorts of unsecured loans can be incredibly helpful. But miss out on a payment and your financial life can become very complex, very quickly.