Payday loans are considered as the easiest types of unsecured loans. In a typical payday loan process, the lender must get your application form and a post-dated check will be issued once your application is approved. The check can be dated a month later or for the actual date of the loan’s release. In most cases, the payday lender will just fork over the money. While this may seem tempting, payday loans are only great solutions whenever you have immediate financial setbacks. Payday loans are not crutches that you can rely on. If you’re new to borrowing payday loans, you need to have the right financial disposition.
Here are some important things that you have to know about payday loans:
Payday Loan Amounts Will Vary
For payday lenders that issue checks, the amount that you’ll receive is lower than what’s written. On the moment of the transaction, service charges will be deducted based on the total amount of the loan. While many borrowers complain about this, such deductions are included in the loan’s terms and conditions. The same thing can be said for lenders who don’t issue checks.
You May Get Additional Amounts
Once you’ve applied for a payday loan, the lender will place your information in an account. It’s possible to have more funds in your account to cover all possible charges. However, this is only possible if you’ve had previous transactions with the lender. If ever you can’t repay the loan using your pocket money, the lender will draw from your account. After repaying loans successfully, some lenders may urge you to take out loans with higher amounts. This is called refinancing; it can work for you as long as you’re a good payer.
Payday Loans Can Pressure You Constantly
With the time constraint given by payday lenders, borrowers are often pressured to pay back. Usually, the payment terms are settled on a weekly or bi-monthly basis. Even though borrowers can see that this is manageable, the financial obligation is difficult to reach. What if something happened within the week? How can you repay the interest? If a payday lender uses too much pressure against you, contact the authorities. Keep this level of pressure in mind before applying for payday loans.
Payday Lenders Prefer Those With Low Income
Payday loans are generally meant for low-income borrowers. Since most payday lenders don’t have strict requirements, low-income borrowers are enticed. When these borrowers approach banks, they will very likely get denied because of their low credit rating. For thousands of borrowers, payday loans are blessings. For others, they are nightmare fuels.
Payday loans are definitely here to stay. Before you apply for one, make sure that you’re aware of the risks involved. You should also create a financial plan so that you won’t have to rely on payday loans someday!