Payday Loans- Know The Facts About The Loan
Payday loans are a short term based loans. They are considered an expensive form of borrowing. Never take up a payday loan unless there is an extreme emergency. It is advisable to go for these loans only when you are sure about repaying it on time and in full. Failing or delaying the repayment of this expensive loan can soon make its cost out of control.
Know How Payday Loans Work
These Short Term Loans are originally designed to tide salaried people over until payday. These loans are available online and the desired money is directly paid into your bank account. These loans will let you borrow small amount of funds for a smaller amount of time. Taking out a payday loan is a big decision as higher rate and fees are attached with the loan.
The Cost Of Payday Loans
The cost of the payday loans may vary from lender to lender and state to state. They are expensive and could make your situation worse if you can’t afford to pay it back on time. So, you need to think carefully before taking them out.
If someone is taking out a loan for 30 days will pay £24 in fees and charges per £100 borrowed, and if you don’t repay on time, the most you can be charged in default fees is £15 plus interest on the amount you borrowed.
Legal Status Of Payday Loans By State
Before you make your mind to apply for a payday loan, just check if payday loans are legal or prohibited by the law in your state. The page for each state where payday lending is legal gives the key cost of loan terms under state law.
Look for the cost of a payday loan in pounds and annual interest rate for a 14-day £100 loan. Each page lists the maximum number of loans a consumer can have, any limits on loan renewals and requirements for extended repayment plans.
Legal Status Of Payday Lending
Payday Loans fall under the category of small loans and are subject to state regulation. Many states also have criminal usury laws to protect consumers. These loans are available in the UK for an amount up to £1000 to be repaid over a short term, or until "payday". More closely regulated by the FCA, interest rates were unregulated, with a typical loan costing as much as £25 for every £100 borrowed per month. The payday loan industry in the UK has grown rapidly.
Using A Payday Lender Is Not Recommended
If you need of small amount of funds on immediate basis, you may not able to get credit from a mainstream lender. You may be tempted to take out a small loan from one of the most risky yet popular payday lenders. However, you need to be sure about all other options available first as the interest charges on payday loans are on a higher side as compared to other traditional loans and you could end up in a debt trap.
Alternatives Available For Payday Loans
• Get a cash advance from your employer against your next paycheck
• Ask for money from family and buddies
• Borrow funds from your savings account or emergency funds
• Get a Centrelink advance
• Borrow money from credit union
• Get a bank overdraft
• Use your credit card
Avoiding The Debt Trap
If you have problems in paying off your payday loans, talk to your lender immediately and ask for an extension or rollover. However, lenders have limited rolling over the loan option which you must know in advance. Rolling over a payday loan may seem like a great solution but it involves a huge fee that varies from lender to lender. When you are paying much more in interest and other fees, this could leave you struggling to pay for the essentials you need.
Beware Of Payday Lending Frauds
Payday lenders advertise their loans for each and every cash flow crisis. But applying for a payday loan can be wrong choice if:
• You don’t want to use it to cover emergency expenses
• You want to use it to pay other loans
• You already have one or more payday loans
• You are not 100% sure about paying it back on time
The Bottom Line
Before taking out a payday loan, think carefully about how you are going to pay it back and if it is legal is your state or not. Ask yourself if you have extra income to pay for such huge interest charges. It is easy to take up a payday loan but it is really challenging to pay it back on time.
Andrew Winslow is an expert in the field of Finance Industry from past 3-4 years’ experience in different sectors. Proven record of streamlining processes with a tenacious and pro-active approach to improving efficiencies. Enthusiastic and pragmatic Leadership style with the ability to motivate and develop others to achieve results.