Payday loans could provide fast cash injections that could aid you in getting to your next paycheck. However, these loans are accompanied by higher fees and interest rates that could create “debt traps” for those who borrow.
With a large number of individuals and families living from one paycheck to the next, a great number of payday lenders are offering those who are strapped for cash a way to borrow against the guarantee of their next paycheck. For many, life’s unexpected problems often result in a cash shortage, utilities being turned off, or car payments being late.
Luckily for those who are in immediate need of funds, payday loans often provide the answer to an otherwise serious
With a large number of individuals and families living from one paycheck to the next, a great number of payday lenders are offering those who are strapped for cash a way to borrow against the guarantee of their next paycheck.
For many, life’s unexpected problems often result in a cash shortage, utilities being turned off, or car payments being late. Luckily for those in immediate need of funds, payday loans often provide the answer to an otherwise serious problem.
How Payday Loans Work?
Payday loans could be referred to by various names – -cash advance loans, deferred deposit loans, checks advance loans, or even online payday loans, but they generally function similarly.
You will need to make a postdated check payable towards the loaner for the entire amount for the payday loan, including any charges. You can also let the lender electronically debit your bank account, and the lender will typically offer you cash.
The loan will typically be due by the time you get your next payday, typically within two to four weeks. If you fail to repay the loan and fees for finance before the time of due, the loan provider will pay your check-in cash or debit it electronically to your account.
Some states that permit this kind of loan set an upper limit on the amount of loan and the associated fees. The state businesses may be permitted to charge anything from $10 to $30 per $100 borrowed.
10 Tips To Utilizing your Payday Loans
Below are 10 tips for using payday loans and lenders. As is the case with any loan, carefully consider the company and its reputation before moving ahead with the loan process.
- If at all possible, repay the loan in full during your next payday. That is a better option than the refinancing of payday loans, which will result in additional fees and interest.
- Do not use payday loans for vacations or unnecessary incidentals, such as jewelry or expensive clothes. Instead, payday loans should only be used for necessities, such as doctor visits and medicine, groceries, utilities, fuel, car repairs, etc.
- Before accepting a payday loan from a lender, ensure that you have read and understood the entire contract. Read the fine print and ask questions about anything you do not understand before signing on the dotted line.
- When dealing with a payday loan lender, check out their reputation with the Better Business Bureau.
- If you plan to apply for payday loans, make sure to have copies of your most recent paycheck stubs and contact information for your current employer.
- Payday loans are not commonly granted to self-employed individuals because of their unpredictable income. Rather than applying for payday loans, a self-employed individual may wish to consider a secured personal loan.
- If you find that your payday loans have been refinanced multiple times and become unmanageable, consider applying for a credit card that offers 0% APR for 6-12 months or one with a low introductory interest rate. Upon approval and receipt of the card, use the available credit to pay off your payday loan to prevent it from continuing to roll over and increase time after time.
- Even if you have poor credit, you may be able to obtain payday loans. The reason is that a credit check is rarely conducted, but rather, in the case of payday loans, the more important verification comes in the form of current employment and salary.
- When you apply for payday loans, you may be required to issue a postdated check in the amount of the loan plus fees and interest, which will be cashed on the date of your next paycheck unless the loan is refinanced.
- Because payday loans focus their intended repayment on the date of your next paycheck, you must be able to provide proof of a regular payday schedule from your current employer.
What’s next?
If you’re seeking cash-flow payday loans could make your situation worse due to the high costs.
It’s always a good idea explore loans and look at the long-term adjustments you could make to your financial situation that could be able to make a difference. For a start, make a budget, and creating an outline of how you will pay off the debt.