Most lenders do not do a credit check before granting a payday loan. Typically, they ask the person:
- to prove that she has been employed for three months.
- provide them with proof of address, such as a utility bill.
- provide them with information about their chequing account.
The payout period for a payday loan is short: it normally varies from 14 to 28 days. The longest time you can get is 62 days, for about two months. When a payday lender agrees to lend you money, you must sign a loan agreement. By doing so, you agree to repay the loan, as well as the interest and fees charged by the lender.
If You Do Not Repay Your Payday Loan On The Due Date, Here Is What The Lender Can Do:
- Add late fees and interest, which will make your loan even more difficult to repay. Some lenders may charge an interest rate as high as 60% if you do not repay your loan on time. Always read the terms of your agreement for the applicable interest rate.
- Send your file to other lenders, this will hurt your score, and later you will have trouble borrowing.
- Go to the Small Claims Court. If the lender wins, the court could allow him to take some of your money or property. It could also allow him to take part of your pay. This is called wage garnishment.
- The lender cannot give you another loan as repayment of your payday loan.
Make Sure You Understand How Much Your Loan Will Cost You
In 2018, the cost of borrowing for a payday loan must not exceed $ 15 for every $ 100 borrowed. This rule may lead users to believe that the interest rate on their loan is 15%, but this is not the case.
Interest is normally calculated over a period of one year. Banks, credit unions and credit card companies usually charge an annual interest rate, regardless of the repayment period.
Payday lenders do not express the cost of borrowing as an annual interest rate. Rather, they set a fixed amount for the entire repayment term, which is shorter than a year.
The time to pay off a payday loan usually ranges from 14 to 28 days; it can be up to 62 days at most. Therefore, the cost of borrowing is equivalent to a much higher annual interest rate than 15%.
The following example shows what the annual interest rate would be for a $ 100 loan, the cost of borrowing would be $ 15, depending on the number of days you would have to repay the loan.
For example, if you use your credit card to make a purchase of $ 400 and the annual interest rate is 15%, then the interest will total about $ 5 per month or $ 60 per year.
On the other hand, if you borrow the same amount from a payday lender who asks you to pay him $ 60 every 14 days, your loan will cost you around $ 129 per month or $ 1,543 per year.
The payday lender may also ask you to pay interest on the total amount you owe him if you don’t pay it back on time. Check-in your loan agreement how much you will have to pay if you exceed the scheduled repayment date. The lender can apply an interest rate as high as 60% from the date your balance is due. In the end, your loan could cost you dearly.
If you use your credit card to get a cash advance instead, the interest rate is likely to be higher than the usual annual rate, but the final cost of borrowing will be lower than if you are dealing with a payday lender.
If you need money for a short period of time, use a credit card instead; your loan will cost you much less than if you take out a payday loan. There may also be other solutions to your money problems. For example, you could consult a credit counselor from a non-profit agency.
Consult A Credit Counselor
If you have a lot of debt or are having trouble paying your bills often, get credit counseling from a non-profit agency. He can help you find solutions to manage your debts, and also show you how to avoid having the same problems in the future. This could help you improve your credit rating.
A Credit Counselor Can Help You:
- to make a budget ;
- understand how you got into debt;
- understand how to get out of debt;
- talk to your creditors to reduce your debts;
- to establish a plan for repayment of your debts.
Usually, the first appointment to review your options is free. Then, if you want more help, there is a fee. Be aware that credit counselors from non-profit agencies are not there to make a profit with you. If you can’t afford to pay for one, you can request a special price. An advisor may even agree to help you free of charge.
Here Are Two Resources To Find A Credit Counselor From A Non-Profit Agency Near You:
Only credit counselors whose names appear on these two websites are licensed. These professionals must undergo training and observe a code of ethics.
The services offered by credit counselors from nonprofit agencies are different from those offered by credit repair agencies and debt settlement companies.
Apply For A Loan From A Bank Or Credit Union
Perhaps you believe that the bank or the credit union will not accept to lend you money. The only way to find out is to ask them. Even if they have refused to lend you in the past, their decision may be different today.
Even if you have financial problems, your current situation may be different from before. If you now have a regular income, you may be eligible for a loan. The bank or credit union may also agree to lend you money if you find a co-signer or a guarantor. You can ask a relative or friend to co-sign for your loan.
LoansAngel.com makes possible to request such financial services as personal, installment and payday loans with a single application form. Such solution will help to find more options for you. Loan amounts may vary from $100 to $5,000.