Payday Loans : Things To Consider
Payday loans are extremely popular these days. This is because they are convenient, easy to qualify for and fund quickly. When most people secure a payday loan, they have no other choice and this is the only type of loan that they can get that fills their needs. You do need to be careful though because payday loans can be dangerous. Here are some things that you need to consider.
- Payday loans have high interest.
When you consider the fees charged by payday loans and the short duration, the effective APR is quite high, usually over 100%.This is because of high fees that are to be paid back in a short term of typically 2 to 4 weeks. These types of loans are risky for lenders which makes the fees justified.
- Do you really need the money?
Think long and hard before you commit to a payday loan. Do you really need the money or are you trying to borrow money for something trivial that can wait. If you need to pay the electric bill, for example, or the lights will be shut off, that is justified. If you want to go out this weekend but find yourself broke and needing to borrow, that is not justified. Make sure you are getting this money for a need and not a want. In addition, look into late fees charged by the people that you need money to pay. They may be less than the fees charged by payday loans.
- Can You pay the loan back on time?
These loans have short terms and must be paid back within a few weeks in most cases. Make sure that you are able to pay back the loan in that time period. If you can not, you risk getting stuck in a payday loan trap where you are continually renewing the loan and paying fees every few weeks. If you know for sure, that you can not pay back the loan on the due date, do not take out one of these loans.
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More Important Things To Consider
After considering the above things, if you still need a payday loan, here are a few more things to consider. Here are a few things to never do.
- Never borrow more than you need.
Get just what you need to cover the expense in question. You do not want to get that extra little cushion, because it will come with more fees. Most payday loan companies will be more than happy to give you as much as you qualify for. It is up to you to draw the line in the sand as to how much you will borrow.
- Never borrow from multiple lenders.
This is a bad idea because it can leave you with an overwhelming amount of fees to repay. It also may be illegal, depending on your circumstances. It is probably not possible for a lender to tell if you are borrowing from more than one source at a time so it is up to you to be responsible in this regard.
- Never take out a loan to pay an older one.
This will just put you in an endless cycle of payday loans that you will never escape. Deal with the old loan lender and work out payment arrangements. Also check your states regulations. There may be a legal solution. Some states, for example, require a lender to arrange an interest free payment plan.
- Lower your bills if possible.
Many creditors will accept interest only payments or might even allow you to skip a payment or defer it to the end of your term. Check with your creditors to see if this may be an option for you. Even if this does not eliminate your need to borrow, it might decrease the amount that you need to borrow. The less that you borrow, the less your fees will be and the easier your loan will be to repay on the due date.
- Know Your Rights.
A responsible lender will follow the rules and regulations of the state that you are in but not all lenders are responsible. Some lenders will make illegal loans either because they are ignorant of the rules or just do not care. You should research the rules in your state and make sure that your lender is abiding by them.
- Review your loan terms.
If presented with an offer, be sure to review all of the details of your loan before you accept it. Know what the fees are, when the loan is due to be repaid and how it will be repaid. It might seem tempting to just accept the loan and move on but be careful and know what you are getting in to.
In conclusion, be careful. These types of loans can be extremely convenient but they can also be extremely dangerous. Never abuse the payday loan system and take responsibility for your financial future.