If you’re considering taking out a payday loan, you should make sure you do a little research before you commit. Not only will you want to find out the interest rate, but also the repayment frequency and cost of the loan. This will give you a better idea of what you’ll be paying in the long run, so you’ll be able to make a more informed decision.
1. Interest Rates
When it comes to obtaining a payday loan, the cost can add up over time. It’s important to understand the cost of such loans before you take the plunge. There are several options to consider.
You can also do your homework on your own and make an informed decision. However, a payday loan is the best option for you.
If you’re able to afford the monthly payments, you can pay it off in a reasonable amount of time. Similarly, if you need some quick cash, you might want to consider borrowing from a credit union rather than a predatory lender.
2. Repayment Frequency
The payment frequency of payday loans varies from state to state. Typically, payday loans are repayable in two weeks or less, but some states require repayment in 31 days or more. Some lenders offer extended payment plans that let borrowers repay the loan in multiple installments.
While some critics see the payment frequency of payday loans as a sign of debt traps, high frequency users have the advantage of maintaining a stable and critical level of liquidity. This may also be a strategic use of the product.
In a recent study of one lender, researchers found that a relatively small number of high frequency users were paying lower rates on their payday loans. They also found that many of these loans were made to borrowers who used the rollover option so frequently that the fees they paid exceeded the original loan principal.
3. Cost
Payday loans are short-term, high-interest loans that can quickly spiral into a debt cycle. Often, borrowers are unable to pay back the loan on time and must renew or rollover the loan, incurring additional fees.
The average payday loan costs a consumer $520 in interest and fees, with more than one in three borrowers owing more than their original loan. Although these loans seem easy to get, they can be a major drain on your finances.
Payday lenders make their money by charging exorbitant fees. They do this by catering to cash-strapped customers. These borrowers are among the nation’s least educated consumers.
In addition to the astronomical fees, payday loans can also have a negative impact on your credit score. A report by the Consumer Financial Protection Bureau found that borrowers often have to pay more in fees than they originally borrowed.
4. Apply for a Payday Loan
Payday loans are short term loans designed to help people meet their short-term financial needs. They are usually due in less than 30 days.
Generally, borrowers must provide a valid checking account and proof of income. This can include a recent pay stub, unemployment benefits statement, Social Security disability award letter, or pension award letter.
Once you submit your information, your lender will perform a quick credit check. If you’re approved, you will receive a loan agreement with terms and conditions.
Many lenders offer automatic payment options, which will reduce late fees and missed payments. However, it’s important to read the terms and conditions of the agreement before signing it.
Before you apply for a payday loan, consider the interest rate and fees. Some payday lenders may charge high annual percentage rates. You should also understand any loan rollover rules.
Some payday lenders may require a signed check. While most lenders do not run a hard credit check, a small dip in your credit score is possible
