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| Payday Loans Neon Sign (Photo credit: rinkjustice) |
Payday loans have a distinct purpose and you have to understand that they are in a completely different league from regular bank loans. If your need for extra cash is minimal and immediate and you are looking for a short term payment period, then a payday loan may be the ideal choice for you.
When it comes to payday loans and other types of short term loans, it is extremely important that you abide by the terms and conditions of the loan and ensure that you have the cash to pay back the loan when it matures. For payday loans, you have to develop the mindset that you are drawing part of your unearned income. Thus, you need to set aside that portion of your next paycheque for the amount that you need to pay back the loan even before you take out one.
Think short term when it comes to payday loans or cash advances. This means that such loans are to be used as financial tools for exigencies that are temporary or transient. And while it may be tempting to opt for payday loans every time we need cash, it is extremely important that we don’t misuse or abuse this credit option.
To avoid serious complications and problems when you take out payday loans, it is important that you know and abide by the rules with regard to the use of payday loans.
- Don’t use it as substitute for regular loans – You are inviting serious trouble when you look at payday loans as fallback in case your application for a loan with the bank is denied.
- Don’t use payday loans to pay off other loans – This unsound practice will dramatically escalate the cost of your loans. And this is the main reason why people get into a vicious debt cycle.
- Don’t borrow more than you need – You have to observe restraint when it comes to this type of short term loan. Take out only the amount needed for essential things.
One of the best ways to find the most reliable and trusted providers of payday loans is by checking the latest information and feedback in websites that specialize in reviews and comparison of various lending companies.
Of course, you would want to find out more about the track record of the companies before you make your final choice. In addition to this, it is also imperative that you assess the kind of service that they provide to their clients. You are better off with a company that provides 24/7 customer assistance.
Finally, before you finalize the loan agreement with a lending company, it is essential that you read through the fine print of the loan agreement and clarify all issues with the company representative.
Sometimes you have to be careful in calculating how much you need, because sometimes you'll have a problem if you underestimate your short-term need.
ReplyDeleteOregon allows lenders to charge a 10 percent origination fee plus 36 percent annual interest. The fee is capped at $30 for loans greater than $300. This makes the effective annual interest rate on a 30-day loan no greater than about 156% which is at least a lot better than you'll find in many other states.
Lenders also are not allowed to lend more than 25 percent of the borrower's expected net monthly income.
Oregon keeps a master file of outstanding payday loans (lenders enter their loans into the system as they are made and retired) to limit borrowers to one outstanding loan at a time (thereby limiting the problem of cascading debt through multiple simultaneous loans). Also, borrowers must wait seven days after paying off a loan to originate a new loan.
It is this last requirement that makes correctly estimating your short-term need critical.
You might borrow $100 in expectation of receiving income in 14 days, but if it turns out you need $150 before the income arrives, in Oregon you cannot borrow that extra $50 until seven days after you have repaid the $100 loan.
While these provisions do tend to limit the problem of getting overextended with cascading debt, it probably leads some people to borrow more than they really need because it's better to be safe (and borrow too much) than to be sorry (by not borrowing as much as you need).
That's a very interesting safeguard. It probably messes up the plans of some people but it also discourages repeat use of payday loan. Either way those loans are many peoples only life line.
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ReplyDeleteLinda
Well, I think that this article is very realistic. Before taking out a payday loan it's necessary to consider all the options available and make sure that you can pay off the loan. Some consumers take out these loans just because they need some cash and then fail to repay and have financial problems. It's not worth to think that a payday loan will solve all your financial problems, these lending products intended for emergenies and it's not worth to use them to cover casual expenses.
ReplyDeleteThink short term when it comes to payday loans or cash advances. This means that such loans are to be used as financial tools for exigencies that are temporary or transient. And while it may be tempting to opt for payday loans every time we need cash, it is extremely important that we don’t misuse or abuse this credit option.
ReplyDelete