Payday Loans

What to consider when taking out Payday Loans

Payday lending has developed over the years, offering new terms and loan categories so as to benefit more people. Before getting a payday loan, it is vital to first understand the basics about payday lending and what each term related to the industry means. Payday loans are a relief to those who get into emergencies that require financial intervention, or when you are under pressure to settle bills. Below are things you should watch out for when taking a payday loan to avoid pitfalls.

Interest rates
Due to the fact that payday loans are a short-term cash advances, they have very high interest rates if compared to normal loans. Every year, payday lending companies publish the annual percentage rate (APR), which highlights the interest charged to borrowers who take money over a year. You may be surprised to realize this rate goes as high as 5000%, which is normal by the standards of the industry. Therefore, before picking any payday loan you need to understand the impact of the rate attached to the loan.

Lenders access your account
One of the most unusual things among borrowers is the fact that direct payday lenders withdraw money from your debit card, without even checking with you. Although the payments are easy to setup, you cannot opt out as easily and this can prove a burden to your finances. You need to have a reasonable plan for repayment to avoid penalties that would attract more withdrawals from your side.

Although most payday lending companies are trusted and reliable, it is necessary to verify details before seeking for a loan from a company, especially if the company is a new player in the market. One of the issues that may arise from borrowing from a company that has not proved its reliability is receiving misleading information about interest rates, which could force you to spend more in the long run.

Late repayment fees
Immediately you are issued with a payday loan, you automatically agree to the terms attached to the loan. In the event you fail to submit repayment in time, you will attract penalties, which will be in the form of fines. It is advisable to only take an amount you are sure you can repay comfortably so as to avoid additional charges that may leave a dent in your pockets.

Do you meet criteria?
Each lender has a specific criterion that is followed when evaluating applicants for the issuance of a payday loan. Every applicant must meet these set guidelines so as to qualify for a loan. Generally though, there are not many disparities between companies and you are likely to find out they share similar terms for lending.

For example, most companies only lend to individuals who are over the age of 18. This is a universal guideline that you will find in almost every company. Another thing you need to understand is you must have a regular income, which you are required to prove with various documents as requested by the lender.

Check other lenders
Do not be constrained to one lender when there are many players in the market. Look for the terms offered by each company so you can choose the one with the most favourable conditions to suit your case. This will allow you to receive an affordable loan.