Choosing one of the many different online payday loans options that are available to consumers can be a bit of challenge because these financial instruments come with so many stipulations and potential for a severe increase in your debt.
That’s not to say you shouldn’t choose a payday loan to solve your short-term money problems, but you should go into this arrangement understanding full well what it is you are about to agree to with respect to your financial commitment after the money is loaned to you. For starters, payday loan repayment is supposed to be made in a very short period of time and the fees and interest that are attached to the loan can be significantly higher than a loan you might find with other lenders.
Let’s review the basics of payday loans so you are better equipped to make the right decision for your financial situation and the emergencies that might come about when you least expect:
Payday Loans are Fast
Getting a payday loan is designed to be quick and easy. You fill out an online application with your essential personal information and you will be put in touch with lenders who service these types of loans. This is the main selling point behind payday loans, they’re done fast and the money can sometimes be in your account within hours of approval to the very next day.
But that speed is also going to cost you. These types of lending arrangements will often come with high service fees and much higher than normal annual percentage rates (APR’s). You can expect a payday loan rate to be even higher than what you might find from a bank or independent lender.
In fact, the criteria for securing one of these loans is pretty basic, you need to be at least 18 years of age, a U.S. citizen and some form of demonstrable income to show that you can pay the loan back, and a valid bank account. Many of these lenders don’t check your credit score, which is a double-edged sword. It allows you to get the money you need in the time you need it, but the fees and interest are going to be significant.
Paying the Money Back
Before you apply for a payday loan, you better be sure you can pay it back in the time the reimbursement is expected, which is usually around two to three weeks from the date you receive the money. That’s why they’re called “payday loans”, you should be able to pay the money back in a short period of time because this is viewed as an advance on the money you’ll be getting on payday.
For many of us, we get paid every two weeks. So that’s the amount of time you’re given to repay the loan. If you are unable to pay the money back in that time, you can typically get an extension in which the loan is rolled over and you are incurring more fees and interest for basically receiving a second loan. This is where the trouble can start. So always be ready to reimburse the lender as fast as you can.