Things to Remember Before You Jump Into Payday Loans
When bill deadlines are fast approaching and money is tight, it is all too tempting to turn to payday loans for relief. Borrowers can get a small sum quickly and give it back with interest on their next pay cycle. These loans are very easy to acquire as long as the applicant meets the minimum criteria so people flock to them in droves. As long as one can demonstrate the ability to pay back the loan by presenting proof of steady employment, the application should be approved without any hassles.
What’s more, the lenders do not bother to conduct credit checks or other forms of background investigation. They welcome all interested parties, even those individuals denied by banks due to low credit scores. However, caution is advised when dealing with this form of borrowing. Criticisms have been hurled at the practice and those who plan to take out bad credit loans should take them into consideration for a balanced outlook. Here are just a few of the most salient points:
The Issue: Payday lenders may issue rapid approvals but they tend to impose extremely high interest rates on their borrowers – to a degree that dwarfs anything regular banks typically charge. This could increase even more if a person fails to pay on time or commit other violations of the loan contract. Lenders try to justify their rates by arguing that they assume great risks when they give out loans for bad credit and that the only way to recover their potential losses is to charge what they do.
The Solution:Be aware of the interest rates and fees associated with the loan. Read the fine print for any hidden charges and penalties to avoid surprises down the road. Of course, as much as possible, pay the loan on time to prevent complications that could make the money owed swell to double the original or more. Also, check whether the rates are within the legal limits of the state and study the rights of borrowers provided by law, just in case trouble ensues down the road.
The Issue: There are lenders which operate through typical offices and those that accept online applications. It is the latter kind that potential borrowers should be wary about because some of them are merely scams that dupe people into providing their financial details, then automatically deducting “payments” even though they did not avail of the service. There have been plenty of reports that implicate Las Vegas-based online lenders but this modus operandi could spread out to other areas.
The Solution: It helps to approach each lending site with a healthy dose of skepticism. Do not provide private details, bank account numbers, and the like to random lenders, even if they promise more information or reduced interest in exchange. Conduct a bit of research on the Internet about these online lenders to see which ones have been around for long while and are highly regarded in the industry. Seek out client reviews from several independent sources.
The Issue: Critics say that this type of loan only serve to bury needy people into a deeper hole. Those who need bad credit loans but are turned away by banks often have to bite the bullet and agree to the soaring rates imposed by lenders. It is not uncommon for individuals to borrow more in order to pay old loans, and so on until all they do is chase deadlines to manage ever increasing debts.
The Solution: Use these loans only as a last resort for emergencies and borrow only the minimum amount required. Do not abuse their ease of acquisition because there is always a catch. It takes responsible fiscal management to be able to pay them back immediately while avoiding excessive charges. These loans have their place and as long as they are not misused, then they can be valuable tools for people in need. In some cases, they have been instrumental in getting out of debt.
Borrowers must protect themselves at all times by keeping themselves informed about the transactions they wish to make. This is especially true when it comes to ubiquitous pay day loans which are loaded with complications but can be used in a positive manner if handled appropriately.