Payday loans allow borrowers to get a small amount of money, which they can repay within a short period. The duration of payday loans usually lasts for a couple of weeks to a month, until the borrower receives his next paycheque. This type of loan is easy to get, and you’ll have the option to apply for one online or from a brick-and-mortar shop.
It’s ideal to get a payday loan if you need emergency cash for, say, home repair or a medical bill. Payday loans online could come as a savior for you when the end of the month is approaching, and your funds are running low.
Before making any decision, there are certain things you need to look into when you’re planning to get a payday loan. Learn more about them below.
Unlike other types of loans, payday loans are relatively easy to get. However, a borrower should still meet a few requirements for him to be eligible.
Below are some standard criteria to be eligible for a payday loan:
- Age – This criterion makes sense since an individual is only allowed to do financial transactions when he is already 18 years old and above. Otherwise, the lender rejects the loan application.
- Job – One thing that speeds up the approval of your loan is a stable job. A borrower should have a reliable source of income. You can provide your payslip or a contract of employment from your employer as evidence.
- Bank Account – The application for payday loans becomes much easier if you have a bank account. This also applies to self-employed individuals who only need to present a bank account statement as proof of their monthly income.
Payday Loan Source: Loan Center or Online?
This is an essential consideration that a potential borrower has to take into account. Which is a better source for getting a payday loan—a loan center or online platform?
Both options have advantages, but the benefits of online payday loans outweigh traditional loan centers. Here are some reasons why:
- It’s much easier to choose the deal that’s best for you with online loans.
- In online loans, the market of reputable lenders is vast, and you can easily compare them based on reviews from previous customers.
- Bad credit won’t necessarily be a problem with online payday loans.
License Of The Lender
If you borrow cash from an online payday loan lender, make sure that the lender offers consumer protection. Check if the lender is reputable by verifying their license on your local Better Business Bureau website.
Here are the things you can do so you can tell if a lender has the necessary license to do business in your state:
- Check if your state allows payday loans. If (a) your state doesn’t allow payday loans, and (b) the lender claims to have a license to do business in your state, chances are the license is fake or questionable.
- You have to verify the license information with the state regulator. You can either visit the website of your state’s regulator, send an email, or call them for the license verification. Make sure that the license is valid, and all the information it contains is correct.
Your Purpose For Taking Out A Loan
While payday loans are helpful, it’s not something that you should use all the time. That said, you have to be clear about your purpose of taking out a payday loan. Whether you’re planning to use the cash to pay off a medical bill or spend it for a minor repair in your home, remember that payday loans are for emergency needs only.
Using payday loans sparingly is essential, so you don’t end up neglecting other bills and hurting your finances just to repay what you have borrowed.
Will The Lender Check Your Credit Report?
Although this rarely happens, it’s still essential to check if your chosen lender will take a look at your credit report. Remember that your credit report can affect your chances of getting approved. This is why maintaining good credit before borrowing money is ideal. However, if you have bad credit and you really need to take out a loan, find a lender that doesn’t check your credit report.
The Risks Before Making Any Decision
Most borrowers don’t think carefully about the risks when taking out a payday loan. A lack of understanding could be a problem and may result in not being able to pay off the loan on time.
Some of the risks of payday loans include:
- There can be a default fee if you’re unable to meet the repayment schedule. A default fee means a higher interest rate that your lender can impose as a consequence of missing payments for a prolonged period.
- Failure to repay on time can result in an extended loan with additional interest rates.
- Your credit rating will suffer, and you’ll find it more challenging to borrow money in the future. With a low credit rating, all lenders will see you as a high-risk borrower, which decreases your chance of getting approved for a loan.
However, you only have to worry about these risks if you’re unable to make the repayment on time. Online lenders for payday loans will not hesitate to help you with money for emergencies. What’s important to lenders is that you understand the risks that come with loans, and take full responsibility for it.
Your Strategy For Making The Repayment
Do you have the capacity to pay the loan on time? What is your source of income? These are questions that you should have clear answers before taking out a payday loan online.
Here are some tips to ponder on for your strategy:
- Before taking out a loan, find an extra source of income other than your job.
- Cut back on your usual spending for one month and save the extra amount to use for repayment.
- Consider the installment option for repaying your loan, if you think that a one-time repayment is hard to achieve.
The Method For Repaying The Loan
Most online loan lenders require the repayment to be done via a bank debit card. Is that something you’re comfortable with? Are you willing to grant continuous payment authority to the lender, so that recurring payments can be made?
If you don’t prefer repayment via a bank debit card, you can always negotiate with the lender. Other repayment options can include paying the loan in cash at the lender’s office or initiating a bank deposit or transfer without the need for automatic electronic payments from your account.
Before taking out a payday loan online, you have to remember some crucial points. First, the loan is only there to cover an emergency need. It’s not something that you should do regularly. Second, make sure that you know how much you need, and you’re happy with the repayment method. Third, read the terms and conditions, and understand how the lender works, and see if this arrangement works for you. And lastly, only borrow from a reputable payday loan online lender.