Short term payday loans customers should understand the terms of the loan and always be careful to evaluate the payday loan provider.
By: Phoenix Lee/
“Despite their high cost, payday loans appear to increase the welfare of consumers by enabling them to survive unexpected expenses or interruptions in income,” said a a Clemson University study which revealed that they are not a contributor to bankruptcy. The study on payday lending showed that by a key measure of financial outcomes, payday loans are not harmful to their users.
Short term payday loans have become an easy way for some consumers to get fast cash. Consumers should make sure they understand the terms of the loan and always be careful to evaluate the payday loan provider.
- Compare rates. While payday loans usually have high interest rates, consumers should still compare the repayment rates and look for a payday lender that offers the lowest rates.
- Check for hidden costs. Check the contract fine print in each offer of short term payday loans for additional hidden fees. These fees could end up costing you a lot of money.
- Compare lenders. Compare the information you find on various payday lenders to see if you can find one that has been in business a long time and seems to offer fair terms on the loan.
- Plan for repayment. Make sure you know when repayment is due and how you plan to make the payment. If the lender has a post-dated cheque, make sure there are funds in your account to cover the money on the due date. Check the repayment schedule to be sure you understand it.
- Know your options. Find out what your options are if you cannot repay your short term payday loans on time. Make sure you can handle any additional interest payments and fees.
- Avoid additional charges. The number one way consumers get in trouble with too many short term payday loans is that they don’t prepare themselves for repayment. Repaying your payday loan at the first due date is the only way to avoid additional interest charges and fees that can quickly pile up and become unmanageable.
- Look at the application requirements. If you are in a hurry, you may want to look for payday loans with instant pre-approval.
- Check out customer service. Call the customer service department if there’s anything you don’t understand about the loan. Not only can you find answers to your questions, but it can give you an idea of the level of service you can expect from this lender.
- Budget for repayment – immediately. As soon as you take out a short term payday loan you should be planning your budget to make sure you can repay the loan with your next paycheck, even if this means you need to drastically reduce your spending.
Consumers who have an emergency savings fund may be able to avoid accumulating loans, but for those who have a true emergency, these short term payday loans can be a valuable short term solution.
Payday lending is the practice of loaning a small, short-term unsecured loan. It is called payday loan regardless of whether repayment of loans is linked to a borrower’s payday. The loans are also sometimes referred to as “cash advances,” though that term can also refer to cash provided against a prearranged line of credit such as a credit card. Payday advance loans rely on the consumer having previous payroll and employment records.
Although some have noted that payday lending appears to carry substantial risk to the lender, others (like the Clemson University study) have shown that these loans carry no more long term risk for the lender than other forms of credit.
You may need a personal loan for a number of reasons — perhaps to deal with unexpected medical expenses, to consolidate high-interest credit card debt, to expand your business, or even to take that well-deserved vacation. Unfortunately, if you have borderline or bad credit, personal loans may be difficult to get at most banks.
Nobody wants to pay a higher interest rate than he or she has to, so consider the purpose of your loan before applying. Is it for debts or upcoming expenses that require immediate attention, or can the loan wait until you have an opportunity to build up your credit score and receive a better rate?
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