How would you feel if you could get instant cash right now? The things you would do are already running through your mind, which is why you’re considering a payday loan, right?
Payday loans are so easy to qualify for, so easy to get approved, and so convenient that they are super alluring. Still, before you go searching for the best payday loan near me, there are several things you need to know.
What Are Payday Loans and How Do They Work?
You may not know this, but there are more than 20,000 payday lenders in America, with more cropping up in the online sector. This is such a huge number, and it’s attributed to the fact that lenders know most people run out of their income before the next payday and need access to some cash until then.
Also known as a post-dated check loan or a cash advance, a payday loan is a small amount of money you get from a lender to get you through the month, and you repay at your next payday.
Essentially, these are very straightforward loans because all you have to do is write the lender a check of the amount you want, inclusive of the interest rates. This acts as the guarantee that they’ll get their money back on your payday.
The thing is, most payday lenders will allow you to extend your repayment date as long as you pay up the interest. You may also incur several additional charges as well. This is one of the reasons why payday loans become a vicious cycle for most people, and it gets quite hard to pay up.
This is how payday loans work, and it’s imperative for you to be careful about the amount you borrow, the lender you get it from, and how long you extend it. Let’s check out some of the things you need to understand about payday loans before you apply for one.
1. It’s Easy to Get a Payday Loan With Bad Credit
If you have a bad credit rating, then you know how hard it is to get a loan from the mainstream lenders. However, this is usually not a big issue for payday lenders because the approval rates are few and simpler.
As long as you are 18 years or older and have a checking account, then you may qualify for the loan, and it may not matter if you have bad credit or no credit history at all.
2. The Interest Rates and Fees Are Sky High
One of the major drawbacks of taking out a payday loan is that you’ll have to pay very high-interest rates. Out of 50 states, only 15 of them regulate and cap these high interests, which gives the reign to payday lenders. The Annual Percentage Rate of payday loans for two weeks can be as high as 390% to 780%.
If you’re not careful, you could end up paying a huge amount in hidden fees, and if you don’t make the payments on time, you’ll end up paying default fees as well. Depending on the lender, these fees could also incur interest rates.
3. You Can Apply For a Loan Online
An interesting fact about payday loans is that you can easily apply and qualify for one online. Once you search for payday loans near me on the search engines, you’ll get a plethora of results from payday lenders.
Online options are super convenient, and as soon as you find a lender that offers quick cash, then you’ll be sorted without needing to go around town looking for the best one.
Once you find the best results for a payday loan near me, then you should research the company thoroughly and understand its requirements, terms, and conditions before applying for the cash.
4. Payday Loans Can Easily Become a Debt Trap
Generally, it should take two weeks to repay a payday loan. However, most consumers take weeks and months to repay the loan, while others take longer than that. This is known as the payday trap, and you can easily find yourself in it if you’re not careful.
Payday loans tend to have very high-interest rates, and the fact that they are short term loans means that most people choose to roll over or renew their loans.
The problem with this strategy is that the fees and interest rates continue to rise, and by the end of it, you have paid almost three times the amount you initially took out.
It gets harder if you have a fixed income, and every time you get paid, you don’t have enough to clear the loan, so you opt to renew it.
5. Payday Loans Require a Payback Strategy
Despite the fact that the loan will take care of your immediate problems right now, you still need to keep in mind that it is a short-term loan. The agreement is usually to pay the loan within 14 days, and even though you give the lender a check, you need a payback strategy.
It may be even better if you can make the payments before the due date. You need to think about the best plan for your paycheck expenses to ensure that you don’t roll over the payday loan.
6. Sometimes a Payday Loan Is Denied
Payday loans are easy to get for most people, but sometimes there are restrictions. The most common reasons to get a denial include unemployment and minor age. If you fail to provide the correct information during the application process, you may be denied as well.
7. It’s Crucial To Have a Good Reason To Take a Payday Loan
Given the high-interest rates and the possibility of getting into a payday trap, you should have a very good reason for taking out the loan. For instance, if you have a medical emergency, then it’s justifiable to take the loan.
It may seem like a good idea to take out a loan to pay for some bills such as phone services and electric bills, but you need to be absolutely sure than paying it back within the stipulated time will be possible.
8. You Risk Your Credit Score and Credibility
One of the most dangerous aspects of payday loans is that they could potentially damage your credit score. If you’re thrown into the debt cycle of renewing the loan, your credit rating will take a hit.
Even if you do pay the loan on time, it could ruin your credibility to other lenders, making you untrustworthy to mortgage lenders and other financial institutions.
To most people, payday loans are a desperate result, and it could be a red flag for lenders since it may seem as if you’re an irresponsible spender. It’s going to be worse and reflects very badly on your report if you do roll over the loan and take a long time to pay it back.
9. You Can Back Out Of the Deal
If for some reason, you no longer need the payday loan after signing up, you’ll have two business days to cancel the deal. The lender will give you until the end of the second business day to cancel the agreement and give the money back.
These two days are known as the cooling-off period, and you won’t have to give any reason to the lender. You won’t have to pay the interest rates or the fees either.
Payday Loan Near Me: Borrow Wisely
Even if you find a legitimate payday loan near me, you should do your due diligence to ensure you’re dealing with a professional lender. As long as you are sure you can repay the loan within the stipulated time, then you can avoid the payday trap and actually benefit from it. However, unless you have an emergency, you should explore other loan options that are not as risky as payday loans.
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