Are you considering a Payday Loan to help get you through a tough patch? This article offers tips on what you should avoid when looking or applying for a Payday Loan. Before making the jump, learn the truth about Payday Loans. Payday loans are acquired from a financial body, usually not a bank, that are typically enough cash to get you by until your next pay period. Most payday loans are due for repayment at the end of the month when you are expected to receive your paycheck.
Payday loans are marketed for people who are working and have financial emergencies that cannot wait until their next pay period at the end of the month. Once you have decided to take out a payday loan, it’s easy to become dependent on them and get further indebted than you intended, one of the primary reasons why most people are discouraged from taking payday loans in the first place.
If despite all the alternatives available, you still feel like a payday loan is the best option for you, we bring you some tips on what to avoid when taking out a payday loan.
Avoid Borrowing Above Your Needs
One unique thing about payday loans is that they are very cheap and almost free to borrow. Borrowing $500 for the whole of the month may sound so cheap and easy that some people may decide to up the ante and get a higher amount which they don’t need for the time being. Such practices could be hazardous because repaying may prove more complicated than expected once the loan is due.
Thus, when considering financing unexpected expenditures by taking out a payday loan, it is critical to apply for the minimum amount that you need. Avoid asking for more than you need, as such could land you into trouble when it’s time to repay at the end of the month. You are better off seeking alternative sources of emergency funds than putting all your needs on a payday loan.
Avoid Rushing for the Short-Term Loan
Although payday loans appear synonymous with short-term loans (usually for a month duration,) the reality is that, few lending agencies are giving out loans for a longer term as well. The name remains payday loan, but with the ability to extend the loan repayment period for up to 3 months or higher. This option is better for you since you can plan well on how to use and repay the loan at the end of the date stated on the payday loan contract. However, you must first choose this option from the very onset.
Also, make sure that you compare the interest you would pay for a longer period with what would be charged if you are paying at the end of the month. If you know that there is a high chance that something could cause you to default on payment at the end of the month, then give yourself as much time as possible to ease the repayment process and prevent getting sucked into exorbitant renewal and late payment charges that make payday loans so dangerous.
Do Not Be Too Eager, Ask Questions About Everything
Even if the payday loan agency is online-based, make it a priority to always discuss with a real person before taking out the loan. You must be certain that you know the company you have chosen. Being too eager to secure the loan without proper understanding, might land you into an unfavorable contractual agreement. Ask questions and request for better clarification of terms and conditions. Remember that every industry has businesses that are less ethical. Therefore, strive to know the interest rates, the payback policies, and possible consequences if you default on payment terms.
Also, make sure the lending agency has a license in your state. All states have their peculiar rules that govern cash advances. Lastly, if there are terms that you do not understand and the explanation is not clear, seek an expert opinion from your financial adviser. In fact, even when you understand all the details, a second opinion is still important because an experienced eye that is familiar with loans will see hidden prints and terms that your untrained eye will miss.
Avoid Taking Payday Loans with Vague Interest Rates and Fees
Thanks to new financial regulations that became binding from last year, all loan holders cannot be charged interest rates and fees exceeding more than 100% of the original amount in question. It is reassuring to know there is a cap limit on the final bill or amount payable but to make sure you are not being taken for a ride by dubious lending agencies, try to verify exactly what you are paying.
Double check and confirm how much money would be deducted from your account to offset the loan when it is due, and how much balance will be left in the account after this payment. When in doubt of what the total charges will be, do not accept the offer.
Avoid Providing Incorrect Information
Payday lending doesn’t require credit checks, meaning you can get the loan even if your credit score is low. Notwithstanding, some payday loan agencies might decide to check with your employer to verify your work status, your regular source of income, and whether they will be getting the money you stated while taking out the payday loan.
Therefore, ensure you have provided the correct information and have contacted someone at your place of work that an inquiry might be made regarding your job status and level of income. Successful verification of your details will boost your chances of getting approved the payday loan.
Another important thing to note is that some unethical lenders may encourage you to falsify or omit information to be eligible for a payday loan. These are the worst of lenders of all because you inadvertently sign away your right to complain if anything goes wrong. Even though you will eventually get the payday loan, the overall cost to you may be so high that you were better off being rejected in the first place. If you do not qualify for a lender’s payday loan, leave it and find another one that is more in line with your present financial state.
Conclusion
There is always a time when we have to borrow to finance unanticipated expenses, and one sure way to accomplish such task is by taking out a payday loan. The best payday loan is the one you never take. The next best payday loan is one in which you have all your bases covered before you get tied up with it. Following these tips will help you avoid being sucked into a hole of debt where you end up paying more than you borrowed or having a bad credit history and in some extreme cases, bankruptcy.
