Payday loans are also referred to as ‘deferred deposits’ or ‘cash advances’. These loans are typically conducted by having the borrower write a check to the lender in order to receive a short-term cash loan. For instance, borrowers may write a $200 check, pay a $40 fee and get $255 in cash. Lenders don’t cash the check until the next payday which can be up to 31 days away.
Payday loans can also be handled over the internet with all of the paperwork signed electronically. You will still need to give your banking information so that the money can be automatically deducted from your account on the due date.
Payday Loan Fees
Most states have regulations about the maximum amounts consumers can borrow through a payday loan. Most set maximum fees at 15 percent of the face value of the check. There are additional restrictions for members of the US military.
These fees are equivalent to the annual percentage rate of 460 percent for a 2 week loan. Actual APR rates can vary, depending on the loan terms. Payday loans are one of the most expensive types of loans borrowers can obtain.
Payday Loan Precautions
Borrowers should exercise care when taking out payday loans. It is best to only borrow what can be paid back on the next payday. On the loan due date, many borrowers discover they can’t afford to pay back the loan. Borrowers should never take out second loans to repay the first loan. This can lead to a vicious cycle of debt that may be difficult and expensive to recover from.
Some Lenders are Better Options
Payday loans are expensive. No matter who is offering the service, borrowers should always expect higher fees associated with repaying payday loans. Some lenders are better than others though. Borrowers must be careful when reading the fine print and trying to understand the terms of the loan. It is always best to shop around for the best rates.
Borrowers usually seek out payday loans in emergency situations. This means there is very little time to shop around. If possible, make time to find the best rates and check out recommendations from other borrowers. Also, borrowers may want to cross reference companies with BBB listings. It’s always best to be safe instead of sorry when trying to avoid predatory lenders.
Payday Loan Restrictions are Increasing
States are continuing to restrict access to payday loans because many lower income families have been resorting to payday loans to pay for rent, mortgage, utilities, and food. Because of this many families are placing themselves in financial jeopardy just trying to make ends meet.
Payday loans are not meant for ongoing cycles of crisis. If shortfall occurs on a monthly basis, a payday loan won’t offer relief. It would be a better option to seek assistance from a church or charitable organization, instead of seeking assistance through a payday loan.
Unfortunately people who choose to borrow from payday lenders may be turning to them as a last resort. Many families seek out assistance through other organizations before turning to payday loans, only to be turned away due to lack of funding, or not qualifying. The working poor are especially vulnerable because they teeter on the brink of the guidelines for many helpful programs. They may earn too much to receive assistance, but too little to make ends meet.
Top 10 Online Payday Loan Services
Currently the top ten online payday loan offerings are:
1. Personal Cash Advance
2. My Payday Loan
3. National Payday
6. PayDay One
10. 100 Day Loans
What to Look for When Seeking a Payday Loan
There are four things borrowers should pay attention to when seeking a payday loan from an online source:
· Site Security
Does the site use a Secure Socket Layer to encrypt any transferred data? If not, do not share personal data with the site. It could be a scam.
· Ease of Use
Is the site easy to navigate and are the terms of the loan clear? If not, it could be a scam.
· Cost of Loan
It should be abundantly clear what the loan is going to cost a borrower. The APR, Interest, and Fees should all be clearly documented.
· Customer Service
There should be clear contact details posted on the site and a live person should be available to answer questions. Ideally, email and chat support should be available too.
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