The payday loan is a short-term loan that charges a very high rate of interest. The loan is sanctioned to almost everyone applying for it and does not turn away those who have low or bad credit scores. Since the loan amount it not very large (ranging in between $800 to $2000), the loan is paid instantly either in cash or direct bank transfer.
Payday loan can either be paid through a check or cash. Usually, upon a mutual agreement a date is set when the lender may deposit the check in the bank, and it is mostly on the payday. The tenure for the loans is very short, starting from a week and up to 30 days, and as the tenure is increased an additional fee is also added to it. The interest rates start from 17.50% for a week. So, you may be subject to paying 300% in one year.
Due to the extremely high interest rates, some states do not allow payday loans to function. However, those that allow have put restriction as to the maximum amount one can borrow from payday loan services.
Here are a few things to keep in mind before you decide to take such a risky loan:
Consider the Cost
Take the cost into account. You should be aware that if you take a loan for a week, the interest rate is 17.50% (or more, like 29.99%), but in case the loan needs to be extended, then you will be charged a fee for it. Moreover, an extension for a year could cost you more than 500%!
You should find out the interest rate before you apply for the loan, and look for an alternative because there will be other payday loans available at lower interest rates and fees as well.
Take into account why you need the loan
These types of high-interest loans can be quite a pain to pay back to the lender. Think of the reason you need the loan for, what kind of loan would be the best option, for how long and whether you will be able to pay it back considering your current income and other expenses.
Though at times taking such a loan is the only way, one should be extra careful while signing up for the loan. Make sure you have checked and re-checked whether the company is authorized, any other options you may have, the details that you are filling in, the terms and conditions of the loan etc.
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