Online Payday Loans: Risks, Interest Rates, Amount and Alternatives
Perhaps, you have heard about how it is incredibly easy to get fast payday loans online. This is completely true. Once you meet the basic requirements, you can have online payday loans in your bank account within a short time. While the best online loans are truly remarkable, they can also become a considerable burden when you do not understand the associated terms. Additionally, online payday loans are not recommendable every time. In some cases, it is more advisable to check out some alternatives before settling for an online payday loan. As a smart aspiring borrower, you want to learn about the less-talked-about terms and alternatives for payday loans. Read this article to find out!
The risk of online payday loans
One of the less-spoken about truths concerning payday loans is the risk attached. Admittedly, there is a little chance of running into financial troubles when you take payday loans that you can comfortably repay. However, the problems start when you cannot repay. Whenever you cannot repay, the lending party will give you a tempting option to extend your loan with additional fees. For instance, a payday loan of $100 may be accompanied by an extension fee of $30. The fee varies from one organization to another.
This is particularly interesting for those who already have poor credit. Since payday loans do not require checking a borrower’s credit score or history, many people rush to take the offer. By so doing, payday loans may encourage their poor financial discipline. As a result, they experience accrued debts. Before long, you may find yourself in huge debt that your monthly paycheck cannot cover. This is one of the reasons why many states in the US do not permit payday loans. Hence, endeavor to give payday loans careful consideration before signing up.
Payday Loan Interest Rates
Aside from the basic loan requirements and the risks attached, it is pertinent to consider the loan interest rates. Do not be surprised to see lending institutions with annual percentage rates exceeding 500%. Admittedly, the amount and duration of payday loans are limited by business models and US regulations. However, care must be taken as fast online loans are an expensive alternative for business funding.
Due to the high-interest rates, a payday loan is one of the most expensive means of funding. For this reason, some states limit the amount that individual lenders can release per day and the applicable fee.
A state like New York even goes to the extent of prohibiting payday loans completely.
Payday Loan Amounts
When it comes to payday loans, you cannot just request any amount. This is because a payday lending institution and your income play a crucial role in determining the qualifying loan amount. More so, many states have established the maximum loan amount that can be released per day. In some states, you have a limited number of payday loans that you can request daily. This saves you from borrowing loans at extremely high-interest rates.
Payday Loan Alternatives
Before you decide on borrowing payday loans, you are best advised to consider other alternatives such as:
- For those who want to cover the utility plan, consider the hardship plan first. Some companies offer such a plan to enable the customer to stretch out their payment. Also, the plan allows users to sign up for programs that help cover your entire utility bill for some period. A good example is the Pacific Gas and Electric REACH program.
- Rather than going straight to borrow, you can ask your landlord to give you more time or wait till your next paycheck. Alternatively, you can pay a part in this month and cover the rest in the subsequent month.
- While using a credit card comes with a high APR, it is usually less than those associated with a payday loan. Hence, it is also a viable alternative worth considering.
- Do not forget that there is no harm in borrowing from a close relative or friend. Advisably, you should set up a contract that will force you into paying when due. In this way, you will not be jeopardizing your invaluable relationship with people.
- If you have a good record at your establishment, feel free to ask for an advance payment on your paycheck from your employers. Some companies provide this offer when employees can provide proof of extreme circumstances. It is usually free of charge in many organizations.
- Reconsider what you want to use the payday loan for. Does it truly worth the risk? If not, you should wait until your payday.
Before concluding, it is worth stating that failure to use loans smartly and efficiently can affect your effort to build wealth. For this reason, you should refrain from collecting loans without learning the full conditions attached. Also, endeavor to consider other better alternatives to online payday loans before accepting. Who knows? Your old pa might just give you the money for free.