8 Things You Should Know About Payday Loans
Regardless of your views on payday loans, there is no doubt they play an important role in the lives of thousands – possibly millions – of people.
Seriously, think about it: Perhaps you’re in an emergency and you quickly need cash to sort it out. You make a few calls to your family members and a few friends, but they all say it’s a bad time. You think of applying for a loan from your bank, but that is going to take a couple of days for the bank to review the application, which could as well be rejected.
Backed into a corner, what do you do? When you’re just about to surrender to fate, an idea hits you… payday loans! Discover 8 things you need to know about these loans.
1. No Collateral Required
We’ve all seen banks and other formal lending institutions going after the property of loan defaulters. When it comes to payday loans, you don’t have to worry about this ever happening to you, because lenders don’t ask for your car or any other asset as collateral.
You’ll, however, have to prove documentation proving your ability to repay the loan. In most cases, these loans are designed for people who are in employment. So that during your payday, you will be able to repay what you owe.
2. Don’t Worry About Your Credit Score (Unless You Really Don’t See Yourself Repaying)
Payday loans are designed for people with low credit rating (those who cannot easily access credit facilities in banks). As such, many lenders have no interest in your score. Their primary interest is your wages.
However, if you’re unable to repay, you lender could hand you over to a collection agency. Apart from coming after you with everything they got, collectors can hand over your name to credit rating agencies.
3. You Can Get the Money in a Few Hours
Need money in one or two hours? A payday loan is your ideal solution because approvals are fast. There are no credit checks (though some lenders perform credit checks) to determine your credit rating or other processes that can potentially delay your application approval. As long as you’re actively employed and hold a bank account, expect a quick approval.
Gone are the days when you had to walk or drive over to a lender and present your application. In today’s digital world, payday loan lenders are getting savvier. You can apply for the loan online, and once approved, it will be transferred to your bank account. When it’s time to repay, the money will also be automatically deducted from your bank account. How convenient is that?
5. Look Out for Hidden Fees
Beyond the interest charges, it’s common for payday loan providers to introduce some hidden fees. This could chew into the amount you applied for.
Be sure to read all terms and conditions. Don’t treat your loan agreement as a software agreement where you skim through to the end and click agree. In those terms and conditions, you’ll likely unearth hidden charges such as initiation and service fees.
6. You Can Talk to Your Lender
What if your loan gets approved today, and you’ll your job next week (before your paycheck checks in?)
Of course, this means you’ll be unable to repay the loan as agreed with the lender. How do you handle this? Wait until the lender comes looking for you?
The best thing to do is to talk to your lender. Tell him what happened and provide termination letters to prove your story. He may still roll over the loan plus interest to the next month, but he’ll certainly give you time to get your act together and pay up.
7. People Fall for Loan Scams
Unfortunately, not all payday loan lenders are genuine. When you apply for this loan, you have to take certain measures to ensure your preferred lender is authentic. You can ask your friends for recommendations, and also ensure the lender is registered. Watch out for lenders who ask you to send them money so that they can process your loan.
Sure, being in a financial tight spot can make you vulnerable and desperate. But it’s important to keep your cool and find a lender who won’t prey on your desperation.
8. Some Lenders Can Harass You
If your loan is repeatedly getting carried over to the next month, you lender may not be so patient to let the amount accumulate. Obviously the higher it gets, the longer the lender will take to recoup the money and pump it back into the business.
It’s for this reason some lenders resort to (often illegal) strategies to get their money. If your lender isn’t reasonable, expect several calls even at odd hours. It’s not unthinkable that a lender can physically look for you to intimidate and harass you.