Financial emergencies can happen fast and without warning. If this is the case and you are searching for a way out, turning to a payday loan for some quick cash is not an uncommon choice in the US.
In fact, there are around 23,000 payday lenders scattered across the states, and you may borrow from such a lender either in-store or online in the event of an emergency. Payday loans can give a relatively speedy option to help make ends meet, but why are payday loans in particular such a popular choice when it comes to looking for a way out of current emergency costs?
Keep reading to find out why a payday loan is a great option for in an emergency.
Why Is a Payday Loan Useful for an Emergency?
When an emergency strikes, payday loans can prove to be the most valuable. With their short-term nature, you can use the money to pay off your current situation and then repay it quickly once you receive your next paycheck.
The features and requirements of these loans have several advantages that work to the benefit of those who need quick and easy cash to cover their current costs:
- No Credit Checks – These loans are particularly useful to those who have bad credit, as payday lenders do not require such an arduous credit check as the traditional bank. Although checks may be required, usually only the minimum credit score is needed to be eligible for such a loan.
- Alternatives to Traditional – Payday loans are more flexible than traditional bank loans. They offer a streamlined funding process that relieves short-term spending pressure, ensuring the process of cash into your account is quick and easy.
- Easy Access – In the states where payday loans are legal, they are relatively easy to come by. Not only are there stores you can visit if you wish to converse in person with potential lenders or, if you wish to, you can acquire a payday loan from the comfort of your own home by applying online.
- Speed – Especially if the payday loan is applied for online, the funding can come quickly into your account. By applying online, you can avoid needing to travel to a store, and avoid the need to wait around for shops to open. You can simply apply when you wish and speedily complete the process.
Therefore, you can gain access to the money you need quickly and without needing to subscribe to the typical requirements of mainstream banks.
What Are the Risks and Difficulties of Using a Payday Loan in an Emergency?
Despite the advantageous features payday loans offer to those who find themselves needing an emergency loan, you must also consider the risks they pose before deciding to withdraw one.
Firstly, you must check if payday loans are in fact legal in your state. Payday lenders do not operate in the jurisdictions of Arizona, Arkansas, Connecticut, Georgia, Illinois, Maryland, Massachusetts, Montana, Nebraska, New Hampshire, New Jersey, New Mexico, New York, North Carolina, Pennsylvania, South Dakota, Vermont, and West Virginia.
Payday loans are illegal in these states due to the potential risks that come with withdrawing them. Namely, that the interest rates that are attached to payday loans can be notoriously high and difficult to pay back.
What Alternatives Are There to Payday Loans for an Emergency?
If you do find yourself in an emergency without a way to make ends meet, there are some alternatives you should consider before turning to take out a payday loan:
- Savings: You may feel reluctant to do so, but this would be a safer option than borrowing money and then needing to pay back an ever larger sum to a lender in a very short space of time. If you have managed to build up equity in your home, you may also draw from a home equity loan.
- Negotiate Bills: If it is a bill that has placed you in an emergency, try and negotiate a payment plan for the bill that can help you to avoid borrowing any additional funds.
- Cash Advances: You may also ask your employer for an advance on your pay cheque, or, you can ask to borrow from a family or friend.
In the future, it would be a good idea to budget and build up a pot of emergency funds in the case of any subsequent necessity. This does not need to be a large amount, but enough so that you should not need to borrow (or at least not need to borrow so much) in the future.
Taking out an occasional payday loan, or loan of any kind, for an emergency should not be too much of a worry, just ensure such loans are not taken out frequently or out of anything other than necessity.
