Do you need cash for your urgent educational requirements? Are you searching for a reliable online installment loan company but aren’t sure which type of loan can be the best for the short-term requirements? There’s no doubt that short-term loan is one of the most convenient and quick solutions to your financial needs. But is that the best option?
Payday loans are one of the most common and sought-after financial options in current times. The reason why more and more people (especially students) are turning to payday loans is its minimal eligibility requirements. Yes, you read it right. Students only need an active bank account to apply for payday loans. Let’s learn more about payday loans and its advantages and pitfalls for students.
What is a Payday Loan?
Payday loans are defined as short-term loans, which involve a small loan amount, i.e., below $1000. The loans designed for students help them meet the emergency financial requirements without a hassle. Usually, payday loans are preferred by individuals with a bad credit score (since your credit score is not taken into consideration by the lending institution). The question is, how does it work for students? Here’s the brief guide on payday loans for students.
The Working of Payday Loans for Students
As discussed above, payday loans for the student are specially developed to provide them with urgent funding. As a majority of students do not have any income source or a credit score, it is highly unlikely for them to pass the eligibility criteria of the standard loan. In such a case, students can rely on payday loans as their quick funding solution. As it is a short-term financing option, it doesn’t take much time for approval. The students can obtain the required loan amount and repay it once they manage to earn a significant income from the other source.
In order to apply for payday loans, students need to provide their identification proof along with their 90 days bank statement to ensure that they will repay the loan amount within the specific deadline. As most of the loan procedures are executed through an online medium, the students can have their loan approved electronically. This means you don’t need to visit the lender or wait for days to get the loan approved. It is important to note that you will be asked to repay the loan amount along with the mentioned fee within the given period (usually less than a month). The payday loans seem like a reliable and a perfect solution to your short-term financial needs, but it comes with its share of drawbacks – one of which is the high-interest rates. Before you apply for payday loans, make sure that it costs a significant amount of fee. Unless you are ready to pay the hefty fee, it is advisable to opt for alternative financing options.
How Much Does the Payday Loan Cost to the Students?
It is important to learn about a payday loan before applying for it. Sure, the lenders may approve your loan request at the earliest possible time, but the high-interest rate and fee associated with such loans can break the bank. And there’s not only interest rate charged on such loans. Here are the fees your lender can charge:
- Account keeping fee that is charged every month (it is usually 4% of the total loan amount).
- Government fees
- The lender fees can be as high as 20% of the total amount borrowed.
- Enforcement fee, which is charged on the failure of loan repayment.
As said above, the lenders of payday loans are flexible when it comes to the credit score and eligibility criteria. You only need a bank account and the identification proof to become eligible for payday loans. Other than that, there are no collateral or credit score requirements.
Risks of Payday Loans
Similar to any other type of short-term loans, payday loans have high-interest rates. But the worst part is you get approximately 16-30 days repayment deadline. If you are unable to repay the loan with the fees, you may end up getting stuck with the loan fee that keeps on increasing with the extended deadlines. Hence, payday loans are only advisable when you have an income source, and you are sure that you will be able to repay the loan within the due date.
The missed repayments come with hefty penalties. Even the individuals with an income source face problems with the exorbitant fees issues. So make sure that failure in loan repayment will not only result in additional expenses but a bad credit score.
Students should apply for payday loans only if they are certain about their income source. As long as you believe you can repay the amount within the due date, you are good to go.