Instant payday loans are such a convenience to so many people who need cash urgently. However, because of the desperate situation, they fail to thoroughly read the contract including the fine print and also fail to give thought to how they would pay for it. Payday loan websites make the whole process sound so easy that they hook in almost everybody right away. What people find themselves in afterward is a labyrinth of fees and surcharges.
Before going for instant payday loans, here are a few things to consider:
• Emergency fund – find out if there is enough in here to cover the present need. One can always pay this back later.
• Bank loans – this may take longer and does not assure approval but at least it is more secure, has a smaller interest rate, a longer term, and is guaranteed to abide by the laws.
• Credit card cash advance – people mistakenly assume that this is more costly than a payday loan. What they do not consider is the longer term. If one is unsure of his ability to pay the loan on time, then it is better to choose this method for an urgent need. It may have a 3% higher interest rate but at least the term is twice as long.
• Borrowing from a friend or relative – this may be embarrassing but it probably is the safest choice. Just get it into writing to avoid bad blood due to forgetting to pay later on.
• State laws – different states have different rules regarding payday loans. Get to know these in order to avoid getting cheated by lending firms.
If the result indicates that a payday loan is really needed, then always keep in mind that:
• Payday loans seem to have a lower interest rate than others. This is not so. Their terms usually last for two weeks unlike other loans, which usually last a month. If, for example, a payday loan has an interest rate of 10%, in a month’s time that would be 20%, making it equal to or even higher than all the other loans.
• Read the fine print of the contract. Chances are, there is where all the traps are stated. Lending companies prefer getting the payment from a customer’s bank account. However, if the customer cannot pay in time, the company will keep on deducting fees from the bank account until the customer has insufficient funs, which will garner him more fees from the bank. This is how one gets into debt. Better to arrange a one time full payment with the lending company via check than have them deduct it from the bank account.
• The most important thing is to make sure that money will be available by the due date. If not, better go for other loaning options.
Financial security is hard to acquire especially in the current state of our economy. We have to do our best to protect ourselves from getting in debt. If we rely on these instant payday loans like they were manna sent from heaven, we will inadvertently dig ourselves into a hole we may never get out off. The best thing to do is be prepared for the worst as best as we can.