What to consider before taking out payday loans

What to consider before taking out payday loans

Are you not financially fit to pay your medical bills? Or, don’t have an emergency fund to manage a sudden requirement for cash? If yes, then you can take out a payday loan to get some money soon. But before you do so, you need to consider certain facts that will help you to make the right decision.

What is a payday loan?

Payday loans are instant cash loans that have a very low processing time. It requires minimal eligibility criteria to apply for the loan. This is the reason why payday loans are very popular among consumers.

How are payday loans helpful?

These loans are the instant answer to emergency cash needs like a medical bill or some repair services at home. There might be such situations, especially towards the end of the month; you may need cash. As your funds become considerably low by the end of the month, it becomes very difficult to pay for such cash needs. Thus payday loans come as a savior for you.

You can even get payday loans online. You just need to apply online to get instant payday loans. You just need to fill up the forms and the amount will be credited in your account within twelve hours to twenty-four hours. The reason for such fast processing is that there are verification of documents and neither is there any credit check with such loans.

What are the eligibility criteria to qualify for a payday loan?

The primary eligibility criterion when you apply for a payday loan is the age limit. The applicant has to be above 18 years when he applies for payday loan otherwise his loan application will be disapproved.

If you are planning to qualify for a payday loan, then you should have a stable income or a job. The approval of the loan amount will depend on your income. You are required to produce the pay stub to provide evidence of your source of income.

People who are self-employed can also qualify for a payday loan. They need to provide a bank statement or any proof of their monthly income
You need to have a bank account. If you have a checking and savings account, then the transaction will be much easier. You need to repay the loan with your next paycheck.

What to consider before taking out instant payday loans

Payday loans come with a high-interest rate

Though payday loans are easily available, they come with a high-interest rate. Since the lender grants you a loan without checking your credit, he charges a high-interest rate in case you default on the loan.

Know your state’s law about payday loan

In every state, there are some rules regarding lending and borrowing money. Payday loan lending is not legal in some states in America. Thus, you should know whether or not payday loan lending is legal in state where you live. If legal, know the law concerning payday loan borrowing.
Check whether or not the payday lender is following your state’s law while lending the loan.

Online payday lenders can fraud you

You can find numerous payday lenders online. They can assure you to give money with sugar-coated word. But be aware! Most of them are not lending money legally. If you can’t repay the loan within time, they can withdraw the money from the account where you have deposited it on the due date.

Repay the loan within the next billing cycle

You need to repay your payday loan within the next billing cycle. If you roll on the balance to the next month, you will fall in the trap of payday loan debt.

Know about the Truth in Lending Act

You should gain knowledge about the Truth in Lending Act which has been established to protect you from the false and misleading financial lending industry. According to the law, the lender is supposed to tell all the costs associated with the payday loan to guide you properly.

Lastly, payday loans are easily available as the eligibility criteria are not so stringent. Once you apply for this loan, it will be deposited in your account within 24 hours. If you have poor credit report, then also you can apply for this loan. The problem is, people are taking out these types of loans randomly and falling into the payday loan debt trap. They don’t repay the loan on time and start accumulating interest rate. Some lenders are tribals and fetching cash from the borrowers accounts till they don’t have any more money.

So, instead of depending on this kind of risky loans, you should try to build saving cushions to meet your financial purposes.