Payday Loan Buying Guide
There are many things that a person should be aware of when looking at obtaining a Payday personal loan. By being aware of the costs and the potential hazards of purchasing this type of loan, one can be better prepared and avoid the various downfalls that cause many people to lose money via the Payday loan centers.
1. Evaluate the need of the loan. This type of loan is only for one's paycheck. This means that it will not be an exurbanite amount of money, simply one paycheck's worth of funds. If one can last until the next pay period, it is often better that one does, as opposed to purchasing a high interest loan to cover the amount.
2. Evaluate the percentage rate. Many of the payday loans have very high interest rates, upwards of a 150% per day. These rates are so the business can turn a profit for high-risk loans and short loan periods. An example of the costs for this loan is a one hundred dollar loan at 150% interest per day would mean that the loan costs $150 the next day, $225 the day after, and $337.50 on the third day. This only places the debtor so far in debt that he or she can find it impossible to get out of debt.
3. Understand all the fees associated with the loan. Some of these loans have closing costs and these closing costs can increase the amount of the loan or decrease the amount of money that one gets in the loan. This can make it difficult for an individual to pay off debts properly.
4. Understand the non-ending cycle that payday loans get one into. The reason one is looking for a payday loan is that he or she does not have the money to pay bills that week for whatever reason. Once one gets the loan, those bills are paid for the moment, but a much larger bill then looms. Because the payday loan is so large, one often spends more money than he or she has to pay off the loan, leaving them short for the next week and in need of another loan.
5. Understand the potential credit damage. One of the most important things to obtaining a home or vehicle or any other large purchase is good credit. A payday loan does not help one build good credit, but rather is often a red flag for other lending institutes. This can make it difficult for an individual to get a good loan for a large purchase. Another major problem occurs when individuals fall behind the payments of the payday loan. When one falls behind, his or her credit score is affected negatively, and that can make it difficult to obtain other loans.
While one should hope that a payday loan could be avoided, if one decides to obtain a payday loan, understanding these five things can make a big difference in the satisfaction that one feels with the loan. There are few things worse than surprises when it comes to money.