There are many things that have to be considered whenever you are thinking of using a financial product. It does not really matter what kind of financial product it is, you always have to think carefully first before committing yourself to it. There are those who say that money isn’t everything in life, but it sure plays an important role. One of the financial products that you might have to use today is the payday loan.
Short Term Loans for Short Term Needs
A payday loan is a loan for a short term which can be taken out against your paycheck. That means you can borrow money with the understanding that it would be paid back once you get your paycheck from work. Because of those reasons, the amount that you can borrow under this form of lending is limited as well as the period that you are given to pay it all back. The loan is meant to remedy short term needs and to provide cash quickly to borrowers. It is not meant for resolving long term financial issues or even ones that involve large amounts. It is ideal for financial emergencies dealing with small amounts that could normally be dealt with by what you get from your paycheck.
Things to Consider When Taking Out a Payday Loan
Are you thinking of taking out a payday loan? There is nothing surprising about that since millions of consumers are using this kind of loan each year. But like with any other financial product, there are several things to check in order to make sure that you are using it to your benefit.
The Right Kind of Lender
One of the more important things to consider when you are planning on taking out any kind of loan is the lender that you will be dealing with. Before you even think about the right qualities of the payday lender that you will be choosing, you have to be sure first that the company that you are dealing with is actually a lender. Does it sound confusing?
You should be aware that there are actually payday loan brokers operating out there. To put it simply, loan brokers act as middlemen between the lenders and the borrowers. They get the information of the borrower and then forward it to the lender. The lenders will be the one to provide the money to the borrower. The problem with that arrangement is that the fee for the services of the broker is going to be shouldered by the borrower. What makes it worse is that in some cases, the borrowers are unaware that they are dealing with brokers and not direct lenders. They are spending more unnecessarily and they have no clue. So the first step for you is to find a direct lender. That should be stated on the website of the lenders so you would not miss it.
Another thing to check when picking a lender is to make sure that you are dealing with a legitimate lender and not one that is out to scam you. If a lender asks to make an upfront payment before they would lend you any money, then you should beware because that’s a scam.
Terms and Conditions
Whenever you getting a loan or you are using a financial product, you have to agree to the terms and conditions of a loan. You have to make sure that you read and understand the whole thing before you agree to it. Never skip the reading of the terms and conditions because there might be some clause there that can spell trouble for you later on. The most important part of the terms and conditions for you to check would be the part about the fees and the rates. See to it that you understand everything about it so you don’t get surprised by how much you have to pay later on. Some lenders might include portions of the terms and conditions in fine print which you need to check very carefully.
If you find yourself in a situation where you believe that the only solution would be to take out a payday loan, it would be a good thing if you can find a lender that has a great customer service. They should be able to answer all of your questions in a clear and timely manner. They should also be available most of the time. The best sign that a company has a good customer service is when they have a 24 hour chat service available on their website or they have a toll free number that you can call anytime. Though the information about their product might be available on their site, it is still more reassuring to talk to someone and ask questions.
Since we have mentioned something about the website of the payday lenders, we might as well go on about that. One sign that you can check if the lender that you are dealing with is legitimate or not is by checking their website. A good and legitimate lender would have a professional looking website that has all the information that would be needed by the borrowers. It should have well-written content. If you encounter a lender whose site looks unprofessional and seems like a child did it then consider that to be a warning sign.
Payment for the Loan
Even if you are borrowing money, you have to learn to think ahead of time and consider the cost repaying the loan. How much would the cost of a payday loan be? This is where most borrowers encounter problems. The cost of payday loans is probably the highest of any other comparable financial products. It is more expensive than credit card cash advance which is also known to be an expensive option. In places where there are no laws regulating the use of payday loans the APR for payday loans can be as high as 400%. In states where there are laws regulating payday lending, the cost of this kind of loan is still high.
You should therefore find out the total cost of the loan and be certain when it has to be paid back. Missing a payment would mean additional costs to you. You must also be sure about the method that will be used for paying back the loan. Many lenders have problems with this. They fail to realize that when they give authorization to the lenders for taking out an amount from their bank account, that the lender will have a free hand in doing so.
Can You Afford it?
Before you really go through with using a payday loan, you have to stop and think if you can afford to take out one. As we have mentioned, payday loans are the most expensive loans that you can get. This is the reason why so many users of it end up with even bigger financial problems. It is easy to understand why you might be tempted to use it. There are very few requirements and the processing is very fast for payday loans. But you have to look beyond the convenience of using it initially and you have to think about its effect on your finances in the long run.
You might resolve your small cash problems now, but if it comes at the cost of ruining your finances for the long term, then it is not going to be worth it.
Even if you have found a good lender that you can trust and you think that you can afford a payday loan, you should not jump straight to taking out one. What you should consider are other options that you might want to try first. The truth is that there are so many alternatives to payday loans that you should only see it as an option when nothing else is working.
You can start out by getting your finances in order. There are only two reasons why you would end up considering a payday loan, the first one is because you are not earning enough and the second one is because you are spending way too much. You can therefore try to earn more by finding an extra source of income or you can cut down on your expenses so that it would be a better match with what you are actually making.
If you really find yourself in a position where borrowing is the only viable option then you have to look at other lenders. Banks and more traditional lenders can give you better terms than what payday lenders can offer. The problem with borrowing from traditional lenders is that the processing of a loan application from them can take a long time. If you need cash quickly then think about borrowing personally from the people that you know. That would also eliminate the need for having to worry about interests and fees and you can come up with better arrangements on when to pay it all back.