If you’re going through tough circumstances, payday loans may seem 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 carry a very high interest rate, they should not be taken unless you have no other option. Here are 7 tips that can help you make an informed decision.
Finance charges
The loan amount you will get is much less than what is listed on the check. The reason is that finance charges are deducted from the amount, so you will need to write a check plus these charges. Failure to do so will result in a higher rate of finance charges that you will have to pay. Most people get into even bigger trouble when they don’t pay the principal amount along with the interest. So make sure you know how much you are receiving and how much you will have to pay in the future.
Paying back
If you don’t have enough funds in your account to pay off the loan, you can try other options. For example, you can renew the loan amount or consider getting another payday loan. But keep in mind that this new loan will have its own additional finance charges and fees. And the additional charges are actually incurred due to the late payment of the loan amount.
State regulations
In each state, the regulations are different for payday loans. Generally, the deadline does not exceed 30 days. The problem is that lenders often issue loans that have a longer term limit. In this case, you are at the mercy of the lender, which is a situation you may not be willing to go through.
Cash crunches
As stated above, the purpose of a payday loan is to deal with a temporary financial crisis, and we have to repay the loan as soon as we get out of financial trouble to avoid high interest and fees.
Therefore, it is not a good idea to be tempted by the trend of “roll over” or you may have to pay a large sum in the end.
Financial situation
These loans are generally for lower-income borrowers, as they cannot afford to borrow from other sources. Here, it is important to note that lenders do not usually take into account the financial situation of those who apply for the loan. So, you need to think more before opting for this option.
Automatic rollover
You should be aware that there are some loan sites that tend to transfer the loan amount automatically. And then there are sites that have some contractual agreements that state that you, the borrower, have no right to file for bankruptcy or file a lawsuit against the lender.
Approval
A great feature of payday loans is that they are easy to obtain, which means that the approval process is significantly easier than other types of loans. Therefore, most borrowers find them quite tempting, but you should be careful and go for this option only if you have no other option left.
You can say that opting for a payday loan is a good idea to deal with a temporary financial crisis, but a hasty decision can get you in bigger trouble. If you’re not careful enough, you can end up in a vicious cycle of debt. Therefore, it is best to repay the loan as soon as you have some extra money in your hands. Hopefully, with these tips in mind, you will make this decision.