What Should I Consider Before Getting a Payday Loan?

Before you get a payday loan you should consider whether you can meet the loan repayments based on the terms and fees associated with your loan.

Payday loans often seem like a quick solution when faced with financial emergencies, however, it’s crucial to approach them with caution and thorough consideration. 

We have put together some important factors you should think about before you apply to a payday loan lender.

Am I Able To Meet My Payday Loan Repayments?

Before borrowing money with a payday loan, carefully consider your ability to repay it promptly. These loans operate on a short-term basis, typically due on your next payday. 

Failing to repay on time can trap you in a cycle of debt, and make your financial situation worse. Take stock of your current finances including how you plan to repay the payday loan, either through your income or your savings. You can then formulate a repayment plan, and anticipate any difficulty you might face in meeting the loan terms. 

While some lenders may offer payment plans or extensions in certain cases, they often entail additional fees and interest, further increasing the cost of your loan.

Conduct a comprehensive evaluation of your income versus your outgoing expenses to decide if you can afford an expensive loan. Remember to consider upcoming financial obligations that might make it difficult for you to make timely repayments. 

By clearly understanding your financial obligations, you’ll make a better decision about the type of financial help you apply for. 

What Are The Eligibility Requirements For a Payday Loan?

Typically, applicants for a payday loan must meet specific criteria, including U.S. residency, being over 18 years old, demonstrating a steady income of at least $800 per month, and possessing an active checking account. 

Unlike traditional loans, payday loans typically don’t consider your credit score. Even if you have bad credit, you may still be eligible. Submitting a form for a payday loan incurs no impact on your credit rating, which is beneficial for those rejected by conventional lenders and banks.

Do Payday Loans Have Fees?

Payday loans often carry very high interest rates and fees, making them a pricey borrowing option. Before committing to any payday loan, take time to read the fine print, familiarizing yourself with the terms of the loan agreement. 

Payday loans can incur annual percentage rates (APRs) as high as 400% or more, depending on the lender and state regulations. You should also be mindful of origination fees, application fees and late fees, which can substantially inflate the cost of borrowing. 

By being meticulous with checking the associated fees of your loan, you’ll gain clarity on the real total cost of your borrowing.

What Repayment Terms Do Payday Loans Have?

Loan repayment terms dictate the conditions set by your chosen payday loan lender. 

Typically, payday loans require full repayment on your next payday, granting you a narrow window to pay back the loan. While some lenders offer extended repayment options or installment plans, tread cautiously, as these alternatives often entail supplementary fees and interest charges. 

Familiarize yourself with the repayment options at your disposal, selecting the one that will allow you to meet them most comfortably.

Consider The Risks

Remember, while payday loans offer immediate financial relief, they also carry inherent risks. Prioritize financial responsibility (whether you can afford the loan and if it is truly necessary for you to borrow) and explore alternative forms of borrowing where possible and this will ensure a stronger financial footing in the long run.