A payday loan is defined as “a small-dollar loan (usually about $100-$1,500) with a two-week term that is due in a single lump payment on your next payday”. These types of loans are used to get cash quickly, when you need it, especially if you’re in a tight spot and urgently need access to cash. A payday loan works as an advance on your next paycheck. Once you get paid, some of that money will be used to pay off your loan.

Before you decide to take out a payday loan, it’s best to know both the pros and cons of doing so. The following are eight different pros and cons of payday loans.

Pro: Payday loans are very accessible.

One of the main pros of payday loans is that they are easy to access. If you need cash quickly, a payday loan can help solve your immediate need. Unlike a traditional loan that takes a considerable amount of time to apply for, applying for a payday loan is quick and easy.

Usually, you’ll get the decision as to whether or not you’ll be able to borrow almost instantaneously, and you’ll usually have the cash within 24 hours. Taking it one step further, by having the ability to apply online, you can even do so from the comfort of your own home, when it’s most convenient for you.

Pro: There’s a limited number of requirements.

Unlike traditional bank loans that require an appointment with a financial advisor, proof of income (pay stubs), social security number, credit check, and several other identification requirements, payday loans require much less to get approved.

Generally, if you are 18 years of age and older, have a bank account, can show some proof of income, and have one form of ID, you’re good to go.

Pro: No credit check is required with payday loans.

With a payday loan, there is no credit check needed. This makes it easier for more people to get approved and have quick access to cash, especially if you have little to no credit. It also speeds up the process, since you’re not wasting time while your credit is being checked.

Pro: Payday loans can be obtained without securing personal property.

Another definite pro of payday loans is that you don’t need to secure them with personal property, like a traditional loan. In the event that you are unable to pay the loan back, your personal property cannot be seized. This is just one less thing to worry about when you take out a payday loan.

Con: Payday loans have costs.

Payday loans can definitely be a lifesaver if you’re in a financial bind, but there are some negatives of payday loans that you should be aware of. One of the biggest cons of payday loans is that they are expensive. Since these types of loans are short-term and unsecured, they have high interest rates.

This means that not only will you have to pay back the amount you borrowed come payday, but the interest as well, making the payment quite large. This comes with multiple risks, like not being able to pay the full amount of the loan back, and not having enough cash for the next two weeks.

Con: Bank account access

Some payday loan lenders require access to your bank account. This could be a con if it’s time to repay the loan and you don’t have the money in your account. The lender could make multiple attempts to take the money from your account, which could result in one or more non-sufficient funds penalties, costing you fees averaging $40 or more each time.

Con: Payday loans may perpetuate your debt.

Every time you need to extend your payday loan, you’ll be charged additional fees. This will add to the amount you already owe, plus interest. As mentioned above, you risk not being able to pay the loan back, having almost your full paycheck taken, and having more and more interested added to your cash advance amount. Because of all this, you’ll likely need to take out another payday loan, and thus the vicious cycle begins.

Con: Payday loans won’t help you build credit.

It would be great if borrowing money from a payday loan lender helped you build your credit. Unfortunately, this is not the case with payday loans. Payday loan lenders do not report to the credit bureau (unless you don’t pay it back) so borrowing and repaying your payday loan will not help you build credit.

Payday loans can be very helpful to you, especially if you need quick and easy access to cash, or you have little or no credit. Like everything else in life, there are disadvantages, so just make sure you know both the pros and cons before deciding to take out a payday loan. Education is key. We hope this list of pros and cons will help you make the right decision.