It’s a matter of fact that payday loans have a bad reputation. Everybody has heard the horror stories of when these facilities go wrong and the expensive results that occur. However, in the right circumstances, payday loans can possibly be beneficial to you. Here are a few tips that you need to know before entering into this type of transaction.
Sometimes, situations occur where your only choice may be a payday loan. Only choose a payday loan after all your other options have been exhausted. If you have a family member or a friend that you can borrow from, try asking them before resorting to using a payday loan company.
While the are usury laws in place when it comes to loans, payday loan companies have ways to get around them. Instead of interest, payday lenders charge fees. The typical annual percentage rate (APR) on a payday loan is hundreds of percent, which is 10-50 times the standard APR for a personal loan.
Payday loans can be helpful in an emergency, but understand that you could be charged finance charges that can equate to almost 50 percent interest. This huge interest rate can make paying back these loans impossible. The money will be deducted right from your paycheck and can force you right back into the payday loan office for more money.
Always consider different loan sources prior to using a payday loan. Borrow from family, work with a bank, or use a credit card–all of these options are more financially sound than a payday loan. Payday loans carry hefty fees and rates that can get you into even more financial trouble.
Explore all your choices. There are many lenders available who may offer different terms. You must have a good credit score, however, and the rates may vary based on how much money you are taking out. Research will likely save you quite a bit of money.
Most companies will require that you have an open checking account in order to grant you a payday loan. The reason for this is that most payday lenders have you fill out an automatic withdrawal authorization, which will be used on the loan’s due date. It will likely be withdrawn from your account shortly after your paycheck is deposited.
Check your credit history before you look for a payday loan. Consumers with a healthy credit history will be able to get more favorable interest rates and terms of repayment. If your credit history is in poor shape, you can expect to pay interest rates that are higher, and you may not be eligible for a longer loan term.
Before you sign up for a loan, do your research. As tempting as it may be, really know your loan terms, interest rates and fees before beginning. Learn as much as you can about the company to prevent paying more than you think you’ll pay.
You now know the pros and cons of entering into a payday loan transaction, you are better informed as to what specific things should be considered before you sign on the bottom line. When used wisely, this facility can be used to your advantage, therefore, do not be so quick to discount the possibility if emergency funds are required.