7 Things to Consider When Applying for a Payday Loan
If you’re going through tough times, payday loans may sound like a tempting option. But if you are not an experienced person, we suggest that you consider this option after much thought. Since these loans have a very high interest rate, they should not be taken unless you have no other option. Below are 7 tips that may help you make an informed decision.
Finance charges
The amount of the loan you will receive is much lower than what is written on the check. The reason is that finance charges are deducted from the amount, so you will have to write a check plus those charges. Failure to do so will result in a higher percentage of finance charges that you will have to pay. Most people get into even more trouble when they fail to pay the principal along with the interest. So, make sure you know how much you’re getting and how much you’ll have to pay back down the road.
Payback
If you don’t have enough funds in your account to repay the loan, you can try other options. For example, you can renew the loan amount or consider taking another payday loan. But keep in mind that this new loan will have its own finance charges and surcharges. And the additional charges actually arise due to delayed payment of the loan amount.
State regulations
Each state has different regulations for payday loans. Usually the term is no more than 30 days. The problem is that lenders often issue loans with longer terms. In this case, you are at the mercy of the lender, which is a situation you may not want to go through.
Money problems
As we said earlier, the purpose of a payday loan is to deal with a temporary financial crisis and we should repay the loan as soon as we get out of the financial problems to avoid high interest and fees.
So it’s not a good idea to get tempted by the ‘flip’ trend or you may have to pay a huge amount in the end.
Financial position
Usually these loans are for lower income borrowers as they cannot afford to borrow from other sources. Here it is important to keep in mind that lenders usually do not consider the financial status of those applying for a loan. So you should think better before choosing this option.
Automatic rollover
You should be aware that there are some loan sites that tend to rollover the loan amount automatically. And then there are sites that have some contractual agreements that state that you, the borrower, do not have any right to file for bankruptcy or file a lawsuit against the lender.
Approval
A big feature of payday loans is that they are easy to get, which means that the approval process is much easier than other types of loans. So, most borrowers find them quite tempting, but you should be careful and choose this option only if you are left with no other choice.
You may say that opting for a payday loan is a good idea to deal with a temporary financial crisis, but a hasty decision can cause you bigger problems. If you’re not careful enough, you can find yourself in a vicious cycle of debt. That’s why it’s better to pay back the loan as soon as you get some extra cash. We hope that with these tips in mind, you will make this decision.
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