Today it is not a problem getting money urgently. You can take out the required amount quickly and easily in the offices or online through payday lending services.
The interest on payday loans is several dozen times higher than the interest rates on loans. And therefore, as the financial experts explained first of all, you need to weigh your financial capabilities. Not everyone can pay interest on small cash advance, and it is not always possible to repay it before the debt begins to accumulate.
Are payday loans ever worth it?
With the high interest rates and fees, a payday loan doesn’t suit every person. The fees alone cost Americans $4 billion annually. As the expenditures associated with these loans are so steep, borrowers do not often manage to pay them back and get into deeper debt, making it a good idea to consider your options carefully before taking out a short-term payday lending option.
However, if you have an urgent need, or require cash quickly and are absolutely certain you’ll be able to pay the loan off with your next payday, then a payday loan issuance may make sense. These lending options may also be worth reviewing if you have no other financial options or if you have poor credit and would not qualify for a traditional bank loan.
When is it worth issuing payday loans ever?
If you ever take out a payday loan, you should be sure the situation is really hopeless:
- if you need money urgently (medicines, car repairs), there is no one to borrow from;
- there is no time to wait until the bank loan is approved;
- you need a small amount before paycheck, pension benefits and so on;
- the bank did not approve the loan;
- there is no official earnings to provide a certificate for issuing a loan.
Before you take out a quick small-dollar loan:
- plan the loan repayment. If you are given the opportunity to choose the repayment date of the loan – choose a day 3-4 days after the salary;
- if you also have other loans, then plan payments so that they fall on different periods;
- carefully choose the term and amount of the loan. Do not get into debt if you are not sure that you will be able to repay the funds on time;
- it is recommended that the debt load on all loans does not exceed 30-40% of monthly income;
- study the individual terms of the contract for the availability of additional services;
- check the full loan amount. The total cost cannot exceed the average market value by more than a third.
What to do if you can’t repay the loan?
If you still can’t repay the loan, you need to do the following:
- do not hide from the lending service, answer calls and contact the payday lender first if you realize that you cannot pay the loan back. Try to negotiate and possibly extend the loan.
- contact your relatives for help, or at least to the bank to take out a loan on more favorable terms. Or wait for a court notice. As a rule, when it comes to court, all illegally accrued fines and commissions are canceled. But legally accrued – remain.
Pros and cons of payday loans
Top advantages are:
- a convenient and prompt way of application. You can get a small loan online. You do not need to visit the department in person. Companies have an automated system for reviewing applications. Thanks to them, you get an answer in a couple of minutes. The service is available 24/7.
- different crediting options: the card, e-wallet, money transfer to the bank account, in cash (if there is a department).
- a small set of documents. You only need an US ID. You will not need income certificates and a guarantee.
- loyalty programs. If you meet all the terms, repay the debt on time, then the second appeal will be on more favorable terms. You will be able to get a larger amount at a smaller rate.
- possibility of restructuring. If you have financial difficulties and you cannot pay the debt, then the companies meet you halfway and offer to lower payments by extending the loan term.
- availability. Payday lenders will approve a loan even if they previously allowed delays and have a bad credit history.
The main disadvantages are:
- the cost of the loan. Overpayments on payday loans are very large and usually within 720% per annum. Give it back on time to avoid monstrous overpayments.
- methods of collection. Before receiving a payday loan, check the MFI for legality. When cooperating with an illegally existing MFO, you may face unpleasant consequences.
- short-term loan. Usually you get a loan for up to 30 days, but some lenders are ready to issue for up to 3 months.
- small amounts of loans. You will not be able to get a large amount on credit. Only small loan amounts are available.
- lack of a legislative framework. The state does not stipulate a fixed interest rate. Each company has its own loan terms and repayment methods. In some cases, you will have an overpayment of over 1% per day.
- a large number of scammers. On the Internet you can meet a large number of fraudulent companies that require you to make a down payment.
- risks of late payment.