Emergency financial expenses can be a serious drawback to most individuals and families. Very few people can manage to pay such expenses from their pockets without feeling the heat. The reason behind this is because not so many people have a saving culture, and even the few who do not earn enough to cater for their daily expenses and have enough to save. About 61% of families in the United States (US) are not able to pay an unexpected $400 without struggling. It is this lack of insufficient cash flow that pushes people to take an emergency or payday loan to cater for such expenses.
Much as they can assist you to cover those unexpected expenses and give you a short term relief, they can later affect your financial well being and your credit report if you do not understand their terms and conditions. Here are some things you should know about to ensure that you choose the right one, and one that you will manage without a lot of pressure.
High Interest Rates
Payday loans cater for those unable to meet their emergency expenses using their paychecks. They are forced to borrow usually at a very high cost to meet these needs. It is important before you borrow that you check the rate of interest of your lender. Since it is private businesses that lend these loans, there is bound to be competition to win clients. Avoid the rush to sign up with just any lender. Instead, ask around and do a quick research online to get one with the lowest rates possible. The lower the rate of interest, the easier it will be for you to repay the loan.
Ensure You Know How Much You Can repay per Month
It is important that you calculate how much you can afford to repay based on your monthly earnings. Knowing the amount you can pay comfortably enables you to take only that amount that you can service without affecting your life significantly. If possible, avoid taking very high amounts with very short payment periods. You may end up paying more with the longer payday loan periods, but you will do so comfortably.
Get to Know the Risks
There are a lot of loan predators out here. These predators prey on those with limited finances and with low credit scores such that they cannot secure cheap and secure loans from banks and other established financial institutions. These predators aim to make as much interest as possible using payday loans. Before you go for these loans, make sure you know the risks associated with that particular loan. Some lenders are just out there to take as much as they can from you. Check their terms and conditions carefully and have a written agreement to cushion yourself in case of any misunderstanding.
When to Take Payday Loans
It is important that you know when is the most appropriate time to take a payday loan to avoid incurring unnecessary expenses in interest. Payday loans are not appropriate to pay off significant bills like medical ones. You would probably need your insurance to cater for such bills since it would be difficult to find a lender or an institution that gives you very large amounts. You take payday loans in an instance where you need to pay for your monthly bills before your pay arrives to maintain a positive credit score.
Get to Know the Fees
Some loans are very limiting when it comes to fees that you are required to pay, that they lose their importance in the first place. Get to know the amount of money you will pay as fees since the lenders deduct this money upfront from the cash they lend you. If the amount they are deducting is a large percentage of the money they are lending, then consider getting financing another place.
Check if Lender is Regulated
With so many lenders after your business, you might easily fall for a con if you are not careful enough. There are so many people in need that have ended up losing their money instead of getting help from the so called payday loan lenders. These cons will have you signing agreements that eat into your entire payslip and more if you allow them. To avoid such scenarios, ensure that the lender you approach is regulated. No matter what your need is, do not rush to just any other lender. The authorities monitor regulated lenders to prevent them from exploiting gullible individuals.
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