If you find yourself in a situation where you badly need money, you may consider getting a payday loan. It’s usually a short-term loan that is $500 or less. It’s due on your next payday, but it can come with high costs. Depending on your state law, this type of loan is accessible through storefront lenders or online ones.
There are many features of a payday loan, and they may vary depending on the payday lender or state laws, but these are the most common characteristics you will see:
- Loan limit of $500
- Usually repaid in a single payment
- You can pay it through a post-dated check or from your bank, credit union or prepaid card account.
Should You Get A Payday Loan?
There are several factors you need to consider when thinking of taking out a payday loan. But, the most critical factor you need to think of is the cost you will pay when you plan on borrowing and the steps you need to take to pay back the loan. We have already mentioned that the cost of repaying a payday loan can be pretty high.
Further details are written below regarding the costs and fees of a payday loan.
Costs and Fees
You will usually be charged a percentage or dollar amount for every $100 borrowed. However, this will still depend on your state law and the maximum amount your state will permit you to borrow. So, for example, if you take out a payday loan, you can be charged ten to thirty per cent for every one hundred dollars you borrow.
So if you find yourself in an emergency and need three hundred dollars and the lender charges $15 for every $100, you will need to pay $45 in addition to the original amount you borrowed in a couple of weeks, so that will be a total of $345.
If your budget is tight, getting a payday loan may not be the best option for you. If you are in a financial pickle, here are some options that you can consider instead:
- Ask family and friends
You can try and ask for help from family and friends; however, if you do not want the feeling of owing money from someone close, you can always check with your employer, non-profit organizations or community groups for assistance. Some may offer advances or emergency credit.
- Get a credit card
Having a credit card is an option, and if you have a bank account or a credit union and a stable credit history, they may offer you a less expensive alternative. So you can ask them for what they can offer.
But, if you have considered these two alternatives and you still need additional cash, you can go ahead and get a payday loan. If you take one out, you can also try to negotiate with your creditor or debt collector. Try to ask if you can make a smaller repayment to help make the repayment a little easier on your end.
If you are expecting an increase in income or looking forward to receiving a tax refund, you can use that money to prepare for the next emergency, so you don’t need to take out a payday loan.
What If You Are Unable To Pay When Your Loan Is Due?
If you are unable to pay on time and your state law permits rollovers, the lender can allow you to pay the fees due, and they will extend the due date of your loan. For example, if you took out a $300 loan and a $15 fee is charged for every $100, requesting an extension will require you to pay an additional $90.
Some state laws require lenders to offer extended repayment plans to borrowers. But, these laws vary by state, and some may or may not require a fee for taking advantage of a repayment plan.
Some lenders can also charge a late or returned check fee if you do not repay the loan on time. Once again, this will still depend on state law. There is also a possibility that your bank or credit union will impose a non-sufficient funds charge (NFS) if your check or electronic authorization is not paid on time due to a lack of funds in your account.
There is an option where your loan funds are loaded in a prepaid debit card. Make sure to read the loan agreement because there may be fees or charges for activities such as adding money to the card, checking your balance, and calling customer service.
A payday loan is an option if you have already exhausted all other available options when looking for additional cash. If you want to know more, you can Click here for more information.