5 Things You Should Know Before You Get a Payday Loan

A cash crunch is always a challenge. Unexpected expenses can blow a hole in your budget, and you may find yourself without many options if you need cash fast to pay for things like car or home repairs. One solution is a payday loan. However, it isn’t as simple as just signing up, and you don’t want to make a mistake when searching for payday lenders for a loan. Here are 5 things you should know before you get a payday loan.

Payday Loans Have a Variety of Names

Payday loans get their name from the fact that they are secured by your income or paycheque. In fact, you used to have to sign over your paycheque or pay on payday to pay off the loan. The payday lender might demand a post-dated cheque for the loan amount plus interest that would be deposited the same day. This is why they were called post-dated cheque loans. Today, lenders will sweep your bank account on the day your paycheque should deposit. This has led payday loans to be called cash advance loans as they’re a cash advance on your next paycheque.

The Interest Rate Can be High

One point in favour of payday loans is that they are independent of your credit score. Your loan is secured by your paycheque, and the amount they loan will be based on how much you earn. However, they offer these loans to many people who have borderline creditworthiness, and that results in a relatively high default rate compared to other options, which is why interest is usually a bit higher. So make sure that you aware of how much interest you’ll have to pay, and avoid being late at all costs.

You Can Apply Online

Many new payday loan lenders allow you to apply online and get money deposited into your bank account within hours or even minutes. However, you need to research the payday lender before you sign up and also make sure that you clearly understand the loan’s term to make sure you can get an extension for instance.

Understand the Rules About CPA

Legitimate lenders will request continuous payment authority or CPA to debit your account for the loan payment. You can cancel the CPA at any time. However, you will still owe whatever amount remains outstanding. Furthermore, if this causes you to miss a payment, you could be hit with even more fees.

Look at Your Options

Payday loans are the shortest term loan most of these lenders offer, but it isn’t the only option. Short term loans are another. One point in favour of short term loans is that you can borrow more than you can with a payday loan. The other benefit is that the loan payments are stretched out over several weeks or months, so the payments are lower. Many payday loan providers also offer short term loans, so make sure that you explore that option as well and see if you would be eligible.
Payday loans are available to those with few other options. However, you need to understand the issues involved so that you choose the right loan for your situation.