Payday loans are geared to people who need cash quickly. For their convenience and minimal credit requirements, these loans charge high interest rates and high fees and have short repayment terms. While a payday loan may solve an urgent need for money in an emergency, it’s important to consider your options before approaching a payday lender. Here’s what you need to know about payday loans and how to find more affordable options

What Is a Payday Loan?

A payday loan is a short-term loan that offers immediate access to cash at an amount usually around $500 or less. These small-dollar loans can charge fees equivalent to triple-digit annual percentage rates (APRs) and have short repayment terms‚ÄĒtypically 14 days. Payday loans are unsecured, meaning they do not require collateral. You can get a payday loan in person from a local loan agency, but many payday lenders now operate online. With a physical branch, you’ll leave a post-dated check with the lender or pay the loan off in person. Online payday lenders collect your banking details so payments can be made directly from your account.

 

Should You Avoid Getting a Payday Loan?

The top reason people avoid payday loans is their cost. Payday loans typically carry finance fees of anywhere from $10 to $30 for every $100 borrowed, which can equate to an APR of 400% or more. For instance, if you get a payday loan for $500, and you have a $15 per $100 fee, you’d owe $575 at the end of your term (which translates to a 391% APR). This can make it difficult for some to pay the entire loan back on time as agreed. In states where rollover loans are allowed, a lender may let you pay the fees only and roll over the principal into another loan if you can’t pay it off by the due date. But this new loan will come with additional fees, and you’ll still owe the principal amount from the last loan. In addition to very high interest rates, a lender may be able to charge late fees, rollover fees, returned payment fees or prepaid debit card fees. The loan agreement should have a fee schedule you can reference before getting a loan.

Consider These Options Before Taking Out a Payday Loan

Many people will use their Credit Cards or get a personal loan to help them in their financial bind however keep in mind that this will also affect your credit score and depending on interest rate your payments may still be high or for longer period to pay off. Of course, having a great credit score and having 0-4.99% rate would be beneficial and that is where we at Credit Service of America want to help you get.

There are several alternatives to payday loans that could help you cover your cash needs. Here are some options that can help you¬†when you’re in a financial bind:

Payday alternative loans (PALs): Payday alternative loans are often offered by federal credit unions. These short-term loans come with more reasonable terms and fewer fees than payday loans. This is beneficial if you already are banking with a credit union that offers this service.

Loans from family or friends:¬†This option can be a huge help if you find yourself in a tough financial situation. However, it could put a strain on your relationship, so it’s a good idea to create a loan contract to give your friend or family member peace of mind that the debt will be repaid.

Assistance programs: Some organizations offer subsidized housing or utility payments, direct cash assistance or even rent relief. They may also provide access to legal experts who can help you understand and advocate for your rights as a consumer.

Selling unwanted items: If you have items of value, you no longer need, consider selling your items online to earn money quickly.

Make arrangements: if the reason you need cash now is to pay utility bill or emergency bill, majority of business will have assistance and help to not fall behind as long as you contact them with enough time before getting into a delinquent status.

 

The Bottom Line

Money management and preparing for the future and a rainy day is always best to start doing now. Let Credit Services of America help you with credit repair, tradelines, debt settlement to have a better credit score and a brighter future. With our consultations and services we will also help get a better understanding on how to manage your credit cards to use for a rainy day.

Payday loans may seem like an easy way to get cash fast, but they come with a high cost. Explore your other options like taking out a payday alternative loan or borrowing money from family or friends. A little creativity and budgeting can help you avoid the payday lending cycle and get you closer to your financial goals.

A Goal without a Plan is just a Wish. Give us a call TODAY at 844-FIX-URCR or click on the following link creditservicesofamerica.com to schedule your FREE consultation and create your personalize plan to achieve your credit and debt GOALS!