Payday loans are also referred as online loans as you can get them conveniently online. The loan given is a generally a small amount for a short duration of time. They are generally used to meet some emergency financial crisis where you do not have any other option.
The advantages of payday loans are
- It is a faster way of obtaining money
- They do not require a credit
- They can be round the clock
The disadvantages are
- It has high-interest rates
- It is for short term only
- They are sanctioned to employed people only and
- They are generally for small amounts.
There are quite a few situations where you can use these types of loans. But before applying for one get all the information regarding the company and its terms and conditions. Compare risks vs. benefits thoroughly and only take a decision.
Here are few things that you should know about payday loans.
Cooling off Period
As a borrower, you will have a cooling off period in which you can cancel your loan without any reason. Generally, a two day cooling off period is given, but it may vary with different companies. You can cancel your payday loan at the end of the last day specified. Ask for this information or check it on the enterprise’s website.
How much does a Payday Loan cost you?
The interest rates on these payday loans are very high. So these loans are not suitable for people who are financially unstable. The amount keeps on multiplying if you don’t pay your previous loan. So make sure you cleared your previous loan before applying for a new one.
Know the time to repay
Get all the information regarding the time given to repay the loan. The information should be readily available. Search the company website for all the information. If you get the money before the time given, it is recommended to clear the loan immediately, as these loans have high interest rates.
Factors to Consider
- Ask yourself if you really need a loan or if you can wait until your next paycheque comes.
- Get all the information regarding the loan like interest rates, time period or research it on the company’s website
- Go through the agreement thoroughly before signing it and keep a copy for your records.
- If the cheques you write to the payday loan lenders bounce, they end up in your file and banks may be unwilling to work with you in future.
Bank Payday loans
Bank payday loans are no different from other payday loans. The disadvantage with bank payday loan is your bank account is accessible to the bank, and they can draw funds from your account if you don’t pay on time. This doesn’t mean that you should not avail a payday loan from banks; using one of these loans is risky no matter from where you get it, and it’s possible that your bank can offer better terms.
As an alternative of availing a payday loan regularly, consider some alternatives like building up an emergency cash fund in your savings account or building a good credit history so you can borrow from mainstream lenders.