When in need of cash, a payday loan can come in handy. Payday loans are a convenient way to get a bit of cash when the bank or other lenders don’t give it to you. In many states, these loans are restricted to a certain amount. More so, many states require repayment up to a certain time.
But not every state has these rules. If you’re not careful with the way you manage this loan, the high fees can put you in serious debt. So if you’re considering a payday loan, here are the 5 things to know about.
They Are Convenient
We did mention that payday loans are convenient. The convenience stems from the fact that they’re designed for emergencies. Banks and similar lenders will look at your credit score before giving you a loan. The case is different with payday lenders.
They don’t care about your credit score, whether you’re in debt, or have gone over your credit limit. They allow you to take a small amount (up to $2500) and repay within a certain period. These loans are specially designed for emergencies such as unexpected medical bills, car repair, etc.
They are short loans, so don’t expect to purchase a house with one. More so, they come with a shorter time of repayment, unlike bank loans. In many cases, you’re meant to repay them the next month.
Not Every Lender Is the Same
In the world of payday loans, suffice to say that not every lender acts the same way. You’d be surprised at the number of lenders that exist throughout the US. With so many lenders, just like there are banks, it’s safe to say that there are a few bad apples.
It’s these lenders that give the rest a bad reputation. Because of shady lenders, many people stay away from payday lenders. But if one lender is particularly shady or predatory, that doesn’t mean everyone is.
You can find good lenders by doing your research. But there is one particular way to make sure you’re doing business with the right lender. Namely, whenever talking to the lender, ask to see their license. Payday lenders require a license to practice in the US.
This is a great indication if you’re dealing with a licensed lender. But that’s not the only way. Whenever you apply for one such loan, you’ll be required to sign an agreement.
Naturally, it will work in your best interest to read the contents of this agreement. While you’re there, ask the lenders to clarify any unclear statement, word, or even the entire document. You’ll be surprised to see the number of shady practices some payday lenders use.
For example, they might mention that their loans come with a zero-percent rate for X days. But if you don’t pay by then, the interest will kick in and quickly overwhelm you. Always look for these things when signing with a payday lender. What’s even more important is to find a lender that is licensed and good at what they do.
So, for information, make sure to visit https://worldpaydayloan.com to get a secure payday loan.
They’re Not For Building Credit
You might get the idea that payday loans seem like a convenient way to build your credit. Unfortunately, that isn’t the case. Payday loans seem very convenient for people with bad credit. Since banks and similar lenders reject them, they turn to payday lenders as a means to pay off outstanding debt.
But these loans don’t show on your payment history. This means that the credit bureau doesn’t consider them when determining your credit score. So one thing to know is that these loans are a bad idea if you’re looking to build credit. Since they come with higher fees, you’ll be paying more than what you’re getting in return.
Only Do It For Emergencies
The reason payday loans exist is that they allow you to take a small loan and repay it in a short time. Nearly every state regulates payday lenders. This means they regulate how much people can take when to repay, and what the interest can or cannot be.
But what no one tells you is that you should only take a payday loan for an emergency. An emergency would be any situation that requires you to pay a larger amount on the spot. Naturally, plenty of scenarios exist where this happens. We already talked about this, but it’s important we go over it in greater detail as it is that important.
Payday lenders know their customers and who they serve. They don’t cater to people who have good credit and can take a loan with the bank. They cater to individuals with bad credit that get rejected by the bank. And states know this as well. That’s why they’re regulated.
Since many states allow you to take anywhere between $300 and $2500, the purpose is to use the money for an emergency. When you take a payday loan, your goal is to repay it as quickly as possible.
What If You Don’t Pay?
And the last thing you should know before considering a payday loan is to understand what happens if you don’t pay in time. The consequences of failing to repay in time can be scary. The scariest things of all are the fees.
The fees will gradually rise to a point where you might have to take another loan just to repay it. But states regulate how much the fees can rise. Some states put a hard cap, while others have no cap at all. For example, Kansas puts a 15% cap on fees. That means the lenders can’t impose fees higher than that percentage amount.
But that’s not all. If you don’t repay this amount, then the payday lenders have all the rights to sue you, send the report to the credit bureau, freeze your assets, or worse, send the report to a charging agency. Charging agencies have their way of making you pay. These ways are mostly legal, but they also charge you for what they do.
So if you don’t pay in time, you’ll end up paying even more. This is why it’s so important to go with the right lender and use the money only for emergencies.