Things to Remember About Payday Loans
Payday loans can be an important lifeline for many people, but they’re also a rather dangerous form of borrowing in that they are offered to the type of customer who is most likely to default on a loan, and they charge incredibly high interest rates. Many payday loan lenders allow borrowers to roll over their loans time and time again, tacking on fees each time too.
Payday loans are something that the average person should be wary of – only taking them out in a serious emergency. Indeed, it may be better to avoid such loans entirely. If you can access an overdraft, an installment loan, or even a decent credit card then you’d end up paying less interest in the long run.
For people who can’t access those kinds of credit, and who can’t join a credit union, a payday loan could well be the only option.
If you’re going to take a online payday loans, look closely at the amount you’re borrowing and the amount that you will pay back. Try to pick a lender that doesn’t just allow you to pay back early, but that will give you lower interest if you do so. Make sure that you’re borrowing from a direct lender, not from a broker, and that you understand the fee structure well. Make sure that the lender is reputable – look at reviews, and make sure that they aren’t known for taking money out of people’s accounts without authorization.
Many payday lenders use something called a continuous payment authority, which means that they have authorisation to take money off your debit card whenever they want to. In theory, they should only take the pre-agreed installment amounts, but sometimes things go wrong and they take out the wrong amount – which can be crippling for someone whose finances are so precarious that they need a payday loan!
There are better lenders that use direct debit, or that even have overdraft protection so that they won’t take money from you that you can’t afford to pay. You will, of course, get charged by them if you can’t make the required payments, but at least those fees will be added onto the back of the loan, rather than leaving you in a position where you just can’t afford to live – and need to borrow money off someone else. Shop around, and know what you’re getting yourself into.…