In fact, situations like these are what led to the development of short-term loans like payday loans or cash advances. When you have expenses that need to be dealt with right away, one of these loans can provide money in an instant. Of course, there is a huge drawback to these types of loans: the interest rates typically run upwards of 400%!
If you’re on the fence about using one of these loans, you should be. But you can benefit by learning more about them. Understanding how they work will allow you to use them in the wisest, most financially-sound way possible. With that in mind, here are some tips and info to help you decide on a short term loan and whether it’s right for you:
Borrow as little as possible. Avoid the temptation to ask for more money than you require. Remember, you have to pay interest on any money that you borrow. Even though it seems like having extra cash would be beneficial, it can wind up costing you a bundle. Short-term loans like these can have high interest rates, meaning that the cost can quickly add up.
Research multiple lenders before you choose. One option is to check out lenders that are located in your city or town. Alternatively, there are also online lenders offering payday loans. Conducting research on the Internet is quick and easy, which means that there is no excuse to avoid learning as much as you can about these companies. Don’t make the mistake of borrowing money from the first company you see. Instead, research your options to find a trustworthy lender with reasonable borrowing terms.
Find out what happens if you don’t pay off the loan on time. In some cases, an automatic renewal will kick in. Most lenders charge high fees for late payments. Before borrowing any money, make sure you fully understand the terms. Depending on the lender, a loan renewal may also be called a rollover.
Make sure the lender is based in the same country where you are located. Borrowing from an overseas lender is a bad idea since you usually won’t have any recourse if anything goes awry.
Find out whether or not the company checks your credit. While most payday lenders don’t run credit checks, some do. Even if you have bad credit, however, you can still usually get approved. If you get denied by one company, you also may want to try applying somewhere else since some companies have more lenient lending standards than others.
Read every word of the contract. If there is anything in the contract that you aren’t clear on, ask for a detailed explanation from the lender. The more thoroughly you understand the contract, the less likely you are to be caught off guard by extra fees or other issues.
Learn about your state’s legal requirements for payday loans. Understanding the laws surrounding short-term loans like these will help you spot any devious practices. If a company tries to circumvent the law, don’t hesitate to report them to the authorities.
To avoid any hiccups in the borrowing process, follow these steps as precisely as possible. As long as you educate yourself ahead of time, carefully read the contract, and know what you are getting into, short-term loans like these can be a good way to get money right away.
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