With the current state of the economy, more and more people are facing financial struggles. Emergency or unexpected expenses seems to be spreading like a virus and can arise suddenly. When financial lightning strikes, many people turn to payday loans for help. But it is extremely important not to use payday loans to end one emergency just to cause the next one. This guide will make you aware of some things you need to consider before diving head first into a payday loan.
If you’ve made up your mind and are definitely going to get a payday loan, please be sure to get everything in writing before you sign the contract. There are all types of scams out there, and once an shady payday loan company gains access to your checking account they can do all type of damage to your finances.
Before taking out a payday loan, consider other lending avenues. Even if it’s taking a cash advance from a credit card, the interest rate could be lower than the payday loan. Also, consider asking friends and family for a loan instead.
Do Your Research
Look into the state that the lender operates from. Each state has different laws with regards to loans. It is not uncommon for unscrupulous lenders to work out of states or nations that lack strict regulation of payday loans. Whenever you learn which state the lender works in, you should learn all the state laws for these lending practices.
Investigate what the total cost of the loan will be. It’s fairly common knowledge that payday loans will charge high interest rates. Many payday lenders, however, charge large processing fees on top of the normal interest rate. The fees you might incur can be hidden in small print.
Know How Much You Can Afford To Borrow
Before you decide on the amount you want to borrow, take a look at your monthly budget. Know what you need to get by. Avoid borrowing against that money. You should base the amount you borrow on money you have left after budget expenses are met. Also, if you’re gonna go this route, it’s best to borrow less than 25 percent of your net pay.
Voice any concerns you may have and don’t be afraid to speak up if you experience a problem with your lender. This will allow them the opportunity to right their wrongs and perhaps offer you a more attractive deal.
Watch Out for SCAMS!
Cultivate a good nose for scam artists before you go looking for a payday loan. There are those who pose as payday lenders only to gain access to your personal information and rip you off. Many of these scam artists wind up being simply lead generation sites set-up collect your information and sell it wherever they can make a quick buck. So it’s best to deal with direct payday loan lenders only.
Now that’s not to say that every leadgen site is a scam, but to minimize your risks it’s just best to deal with a direct lender. If there is a specific company you are interested in doing business with, check out their credentials with the Better Business Bureau (BBB) and other consumer protection agencies.
If you decide to work with a lender via the Internet or by phone, you might want to consider one that does not require you to fax documents. A lot of payday loan companies will want you to send a facsimile to them, and you may not have the right office equipment to do this. This could mean that you’ll have to go to a separate source just to fax the documents you need and expose your personal information even further.
Payday Loans Are No Joke!
Do not take getting a payday loan lightly. Interest rates can vary by lender, but overall you can expect to pay high interest. Avoid using a payday loan for things that aren’t absolutely necessary. It should be a last resort to solve a short-term emergency only.
And by all means, avoid extending the loan. This just adds on to the already high interest and winds up sucking more money out of your bank account. Don’t make matters worse!
Now that you have a better understanding of payday loans, you may find that it can provide just the solution you need to get you through your short-term emergency. That decision is entirely up to you. Overall, payday loans don’t have to be a bad thing, but you definitely need to know what you’re dealing with and understand the terms completely before moving forward.