If you are looking for a short-term loan in order to receive some easy cash, then a payday loan is an option for you. These loans require proof that you have a steady form of employment with a steady income. You are also going to need to have an active checking account. Otherwise, there is nothing more, not even a credit check, needed. This is why many people who are unable to get a conventional loan can get a payday loan.
Payday loans are perfect whenever emergencies come up because they can help you to overcome a temporary cash shortage. However, these loans can also be problematic and risky if you are unable to pay the loan back right away and are thus faced with fees that can mount to a fortune in the long run. Of course, this does not mean that payday loans are all bad. It just means that you need to understand what you are getting into and what the consequences of non-repayment are.
Here are some tips to consider before you decide to take out a payday loan:
1. You need to understand that the amount of cash that is received will be less than the amount for which you have to write a check for. The typical fee can range from $15 to $50 for every $100 borrowed. Most of the time you will need to write a check for this amount whenever you receive your loan. This check will then be deposited into the bank on the agreed upon payback date.
2. You may not always have funds available to make the payment at the end of the loan term. Most lenders will happily work with you to extend the loan. However, this will include another fee and thus you will owe more money at the end of the new deadline.
3. Some states regulate these types of loans by setting a 30 day loan term limit. There are some lenders that get around this rule by having no loans with less than a 31 day limit, which makes them long-term loans.
4. These loans are easily accessible to those who are lower income and thus can be dangerous. In this case, these people may not be able to obtain a traditional loan. Lenders do not consider the fact that these borrowers already have financial problems which may cause them to have difficulty paying back the loan.
5. Some borrowers do not grasp the fact that payday loans are meant to be used as an alternative funding source in the case of an emergency. Instead, they take advantage of the low cost and ease of getting the loan to make frivolous purchases.
6. There are also some fraudulent payday loan operations. You need to watch out for such companies that remove your rights and only protects the lender.
7. You may become accustomed to using payday loans to cover monthly bills. However, whenever your paycheck comes around you will find that you are not able to pay those monthly bills again since you have to pay off the loan instead. This may cause you to have to roll the loan over again since you will not have the money to pay it off. This will then keep you in financial distress.
If you are already having financial problems, a payday loan may be perfect for you but you need to be aware of the potential dangers and thus have the knowledge in order to plan accordingly. You should also always remember that a payday loan is only intended to be an emergency fund.
