A payday loan (also called SMS loan) is a cash advance that you can get and pay using your next paycheck. Payday loans have gradually become very popular among people from different socio-economic status. The credit crunch and a variety of other challenging financial situations facing many people have increased the market for payday loans. Market research indicates that approximately, for every seven banks there is one payday loan agency. The same has happened in other parts of the world, especially some European cities and countries like Göteborg, Sweden, Finland, Germany, the UK, etc.
Payday loans are therefore booming because of the convenience they promise borrowers. Although the payday loans were created to solve financial emergencies, more borrowers are getting into debt when they fail to pay up at the end of the month. Borrowers caught up in debt end up being victims of home foreclosures and other financial difficulties. The viability of payday loans as a solution to tight financial situations remains in question.
The first mistake that most borrowers make is to take up payday loans when they do not have any emergency. Payday loans attract interest rates, a fact that most borrowers do not strongly consider before applying for one. However, there are pros to payday loans just as there are cons.
Pros of SMS Loans
Payday loans are attractive because they are so easy to secure. The payday loan lenders do not take a long time to process applications. Borrowers can get their money in the bank account as soon as 24 hours after placing a request or even an hour. People who have emergencies find this very convenient.
Payday lenders are not keen on carrying out a credit rating check before they qualify a borrower for a loan. Any borrower can get a payday loan if they are having money problems. Banks and other lenders do not offer this level of leniency.
Borrowers who pay back their payday loan in time increase their chances of getting a higher loan the next time they apply for one. Regular borrowers are rated higher than new or occasional lenders. Borrowers are therefore encouraged to keep borrowing and paying back in time to improve their profile.
Cons of SMS Loans
Payday loan lenders do not consider your credit report when you are applying for a loan. However, failure to pay your payday loan in time will reflect on your credit report. Therefore, only people who are sure of where that they will pay back the loan should apply for one. We recommend that you jämföra (compare) multiple lenders before getting a loan.
Payday loans attract very high-interest rates. In comparison to banks and other lenders, these interest rates are extremely high. It is more affordable to get a loan from your bank than to get a payday loan.