You may have heard a lot about payday loans in recent times with much of it being controversial. Whilst payday loans appear to fill a need for fast cash when other financial sources are not available, they can be expensive and some lenders are known to be unscrupulous with their lending tactics. The problem with these loans according to many financial experts is a lack of understanding by consumers on how they work and more importantly the true cost.
If you are in need of money fast then you may be thinking that payday loans offer the best solution. These micro loans work like an advance on your wages and are usually repayable from your next pay check. Loan amounts range from $50 to $1500 with terms of 14 days to 3 months.
With interest rates this high it is vital that you understand and indeed discover the real cost of repaying your loan before you apply. Many people take out payday loans because they are easy to come by but fail to find out how much they will need to repay on the due date and what would happen if they missed this date. A simple loan calculator will tell you how much a loan will cost you over a set term and at a given rate of interest, however it is advisable to ask for a loan quote from a lender first.
Used correctly and responsibly payday loans provide a useful source of cash when you need it most. They are best suited for emergency situations such as those when you are hit with an unexpected bill and your monthly budget just won’t cover it. Using these loans to cover everyday expenses or even to pay other creditors on a regular basis is ill advised as you are likely to end up in more debt as a result.
To find out the cost of your payday loan request a loan illustration or loan quote from the lender. They are obliged to provide this under the Truth in Lending Act and it should detail the loan amount, the interest rate or fixed fees applied, as well other charges and fees for taking out the loan. This should show you just how much the loan will cost you to repay as well as additional fees should you fail to repay on time. You are under no obligation to take out a loan if you request a quote and it is a good idea to compare several loans to find the best rate for your needs.
Never take out more than you can comfortably afford to repay and ensure you still have sufficient funds left to live on thereafter. In case you feel that you won’t be able to repay loan on time, contact the lender as soon as possible to negotiate a repayment deal which suits you both.