There are many different types of loans out there, and some of them are better suited to your needs than others. However, one type that may not be right for you at all is online payday loans. These short-term loans might seem like the ideal solution when you’re in a bind, but they come with some serious risks. Here’s what you need to know about online payday loans before taking one out.
Is it legal?
You’re wondering about it, and so is everyone else. While online payday loans are perfectly legal in most states (at least for now), these short-term, high-interest loans can still make a huge impact on your life. Whether you’re considering getting one or just want to learn more about them, we want to help steer you in the right direction.
Can you get in trouble?
The short answer is yes. Borrowing money for an amount that you can’t pay back in a single paycheck can be problematic. Before taking out a payday loan, know your budget, know your expenses and don’t overextend yourself. These loans shouldn’t be used as long-term financial solutions, but rather are best for covering immediate expenses when finances get tight due to an unexpected expense or other hardship.
Costs & Fees
Before applying for a payday loan, do your homework by looking at lenders’ websites and examining state regulations. Fees can be high on these loans, so read all documents carefully before signing. Sometimes fees are collected in advance or added to the loan balance; other times they’re assessed during repayment. Also be aware that some lenders encourage rollovers, in which you take out new loans to pay off old ones.
Where are they available?
The first thing you want to know about any payday loan provider is where they are available. There are some lenders that operate in all 50 states, and others that only operate in limited areas. You’ll want to confirm whether a lender has a physical location near you before you apply for any cash advance. If they don’t have an office nearby, it might be harder to get help if you run into problems with your loan. Plus, it can be more difficult to verify your identity if there isn’t a local office. As such, we recommend that you avoid lenders who aren’t licensed in your state. That way, you won’t have to worry about being scammed or having to wait longer for your money when something goes wrong.
What are the terms?
Before you give out your personal information, you should always read the fine print. The terms and conditions of payday loans can change at any time, so before accepting a loan, it’s crucial that you know exactly what they are.
Tips for using them safely
1. Do not borrow more than you can pay back. Most lenders will allow you to roll over your loan two or three times. This is how they make their money–they charge you a small fee for each time you roll it over.
2. Check out any company with a lower cost, local credit union before using online payday loans. It could save you big bucks!
3. Ensure that you qualify for a loan prior to applying: Most companies have quick qualification questions and may even pre-qualify in order to get your business right away.
4. Be sure to read all terms of your contract carefully and ask questions if anything seems unclear.
5. Don’t be afraid to shop around for a better deal.
6. Keep track of all payments made toward your balance so you know when it’s paid off completely, as well as what amount is still owed on future payments so you don’t accidentally miss one (and incur late fees).
7. If possible, try paying off early without incurring additional fees; some companies offer interest rate reductions if you do so within certain time frames (typically 30 days).
8. Get everything in writing.
9. Understand that an online payday loan is not a long-term solution to financial problems, but rather a way to buy yourself some time until you are able to address them head on.
10. Know your rights and responsibilities as both borrower and lender under federal law.
11. Consider alternatives like asking friends or family members for help or taking out a personal loan from your bank instead of getting an online payday loan—you’ll probably find it easier to get approved for these options because they’re less risky for lenders and therefore carry fewer fees/interest rates than short term loans.
12. Research other options such as traditional banks and credit unions, which may offer similar products at much lower costs. 13. Read up on state laws regarding payday lending; some states have outlawed them altogether while others regulate them heavily.
14. Remember that online payday loans are intended to be used only in emergencies–not as a crutch for making ends meet every month.
15. Online payday loans should never be used to cover normal living expenses such as groceries, rent or utilities (in fact, doing so violates most contracts).
16. And finally…be smart about it!