Are you considering taking a payday loan or, are you wondering how to pay off one? Before you do so, understand the ins and outs of how it works and make sure you know your rights. These short-term loans are a great help when faced with a sudden requirement for money like a medical expense, a deficiency in travel funds, an urgent home/vehicle repair work, etc.
However, take a loan only if all other options mentioned hereunder are unavailable:
- Borrow from family or friend:Check with your family members/ trusted friend as borrowing from them would be the best option.
- Paycheck Advance: Check if there is a chance of availing an advance from your next paycheck.
- Installment loan:Check for a loan from your bank where you are allowed to repay in smaller parts.
- Government welfare programs.Check for financial assistance from government agencies and credit unions.
Once you have made sure that a payday loan is your last resort, keep in mind the following:
- Predators. First, make sure the lender has a license under the Fair Debt Collection Practices Act (FDPCA). Be very cautious of corrupt lenders and agencies and their illegal activities, threats, and abuses. Do not respond to calls and emails that ask for personal information. Do not get tempted with offers and notifications of pre-approved loans.
- State laws. Understand all the rules and regulations meticulously. Payday loans are not encouraged by all states. Some states follow interest rate caps on the Annual Percentage Rate (APR) whereas, some states place restrictions on the maximum loan amount. Check if your state offers loan-rollover flexibility and if borrowers are safe from criminal action.
- Affordability. Though these short-term loans involve small-dollar amounts ($100 –$1000), they charge interest rates as high as 300% forcing the borrowers to carry forward their loans and end up paying high rollover fees. At most times, you may borrow again to pay off the previous loan. To avoid this situation, make a budget that helps manage your debt responsibly and keep your credit score clean.
- Loan processing. The online application process takes approximately 15 – 60 minutes. Basic requirements of all lenders are:
- Proof of age. (Minimum age requirement is 18 years).
- Proof of identity. (Social security number)
- Address proof.
- Proof of employment and income.
- Verifiable bank information.
Typically, loan processing depends on your credit score/history. Once the loan is approved, the amount gets deposited into your account in two business days.
Helpful companies like Open Loans Direct help you find the best loan provider from among their network of licensed and reputed lenders. Their services are free of charge. Their secure website is accessible on a desktop, laptop, or mobile phone that makes it easier for you to apply for a loan on the go. .
Borrow the required money. But, borrow smartly.