payday loans what to know

Payday Loans: What Do I Need To Know?

Payday loans are a popular form of short-term, “emergency” financing.

They can be expensive (upwards of 300% APR) and they always must be paid back with interest.

However, if you need money to pay for an unexpected expense or to solve a temporary financial crisis, a payday loan might be your only option.

If this is the case, it’s important to understand how these types of loans work so you can make an informed decision about whether or not you should apply for one. Keep reading to learn all about payday loans…

How Payday Loans Work

how payday loans workPayday loans are easy to get. All you have to do is go to a local bank, credit union, or small private lender and ask for a payday loan.

The lender will check your credit score, verify your employment information and give you a cash advance on your next paycheck. (Note: This is usually not a check from your employer – it’s a check from the lender.)

The amount of the advance will depend on several factors, including your credit score, how much you need, and when you need it.

If you are turned down for a payday loan from a lender, don’t despair. Many people who apply for a loan are rejected. It happens all the time and there’s nothing you can do about it.

When this happens, your only option is to go back to square one and try again with another lender. Don’t give up – keep trying until you find one that will give you a loan.

How Much Do Payday Loans Cost?

The cost of a payday loan varies widely from state to state and from lender to lender. However, on average, the APR will be between 300% and 900% and the amount you have to pay back (including all interest and fees) will be approximately double the amount you get as an advance. This is a very expensive way to borrow money.

What Kinds Of Payday Loans Are Available?

There are two primary types of payday loans:

A “rollover” payday loan is simply a regular installment loan that is paid back over a period of 30-days. The APR on a rollover payday loan will almost always be higher than the APR on a one-time-only payday loan.

A “one-time” payday loan is similar to a one-time personal loan or credit card in that you only have to repay the loan once and it will never be collected again.

Pros and Cons of Payday Loans

Payday loans have several advantages.

  • One of the biggest is they are very easy to get.
  • Another advantage is they are very convenient.

They also have drawbacks:

  • They could be very expensive. Lenders will often charge you interest rates as high as 900%!
  • Another drawback is they are not considered a legitimate form of credit by most banks and credit unions so they can’t be used to consolidate other debts or for any type of financing over 6 months to a year.
  • A final drawback is there are some states (like New York) where it is almost impossible to get a payday loan because of the many regulations that are in place to protect consumers.

No matter what you think about payday loans, they are here to stay.

They may be expensive but they are very simple to get and they give you the cash you need without having to wait around for a traditional bank or credit union to process your application. If you decide to use a payday lender, make sure you shop around and find one that has a good reputation and a decent interest rate.

There are now online payday lenders that will let you apply for a loan from the comfort of your own home and get the money deposited in your bank account as fast as the next business day.

These types of loans are often referred to as “online payday loans: and they work much the same way as a traditional paper-based payday loan. The only difference is the lender is an online entity rather than a local lender.

Should You Borrow From A Payday Lender?

That depends. If you truly need the money and you can qualify for a reasonable loan with fair and reasonable terms then by all means go for it. Just make sure you do your homework first!

Should you use a pawnbroker?

Absolutely not! A pawnbroker is not a lender. He is an entrepreneur who has been given the privilege by the government to buy merchandise from people who are struggling to pay their bills. Many pawnbrokers are honest but many are not.

And those that are dishonest can do a tremendous amount of economic damage to you. Pawnbrokers are not regulated so there is no way for you to know whether or not they are going to charge you hidden fees, try to trick you into buying items you don’t want, or simply refuse to return your goods.

In fact, in some cases, they may even try to “eat” your equity by charging you exorbitant interest. The only safe and legitimate type of alternative to borrowing from a bank or credit union is borrowing directly from someone who is willing to lend. And that someone is almost always a private individual rather than a business entity.

Should you use an online lender?

Yes, if you can find one with fair and reasonable terms. But again, do your research. Make sure the lender is legitimate and has a good reputation and a decent interest rate.

Should you use a traditional lender?

Only if you cannot obtain a loan from an online or an online-type lender. In any case, please be careful. Please do not use any type of financing unless you are certain you can repay it. Please do not overload yourself with debt. Please pay back every penny you owe. These types of loans should be considered a “last resort” and only when all other options have been exhausted.

Remember… Borrowing Is Hazardous To Your Wealth And Financial Health!

Please take the time to educate yourself about all of your available options. Make an informed decision rather than making the decision based on emotion or “gut feeling.

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