10 Things to Consider Before Taking Out a Payday Loan

How much should I borrow?

Decide how much money you actually require.

If you’re thinking about getting a loan, you should first figure out how much money you actually need. Because limited-term loans are an expensive form of borrowing with high interest, you should only borrow as much as you need. Any more money you borrow will just increase the amount of interest you pay back to your lender.

How long should I take out a loan for?

The length of time it takes you to repay a payday loan is decided by the amount of money you have coming in. If you have a steady and high salary, you should be able to repay the debt sooner by having a higher monthly repayment amount. It may take longer if you have a more volatile, or simply, lesser income.

What you need to focus on is the amount you can comfortably afford for monthly repayments. Make sure to always leave a buffer for other unexpected expenses that could crop up. If you borrow a larger quantity of money, naturally, it will take you longer to repay it. So, pick a loan term that will make your loan repayments affordable, whether it’s 1 month, 3 months, 6 months or a year.

What can I use my payday loan for?

Payday loans are meant for those who find themselves in an urgent need of cash who otherwise have a stable income. Unexpected situations, such as emergency car repairs, medical bills, necessary household expenses are common reasons for using this form of short-term cash injection. You could use a payday loan to help you cover everyday costs, including car payments, mortgage payments, credit card payments, utilities, food, and rent if you really need to – but you should avoid using payday loans to pay off other loans, as this may spiral you further into debt. Payday loans should not be used for frivolous spending, such as shopping, holidays, and luxury items.

Are there any payday loan alternatives?

Look into all your options.

Be sure you’ve investigated other money-lending options that are less expensive and offer more flexible terms before going to a payday lender. Consider a personal loan, a line of credit, a cash advance on a credit card, cashing in vacation days at work, or asking your employer about a salary advance. You may even sell your old belongings to boost your income. Borrowing from friends and family should also be on the top of your list of options to explore before taking out a payday loan. When you need money urgently, borrowing from relatives could be the fastest and safest way to go.

Am I eligible for a payday loan?

According to the Consumer Financial Protection Bureau (CFPB), most payday lenders simply require customers to meet the following criteria:

• You must be at least 18 years old.
• You need to be a U.S. resident.
• Have an active checking account; and
• Provide evidence of income as well as a valid photo ID.

At Loanza, if you meet the above criteria, we can find you a loan offer. You don’t need a good credit score to be eligible for a payday loan, we welcome borrowers with bad credit scores or no credit history.

Is a payday loan right for me?

If you’re facing a momentary financial problem, a payday loan could be a good option. It’s critical to use a payday loan in the way it was intended. Only take out a payday loan if you’re in desperate need of cash. Unexpected expenses, such as car repairs, medical costs, or veterinary fees, occur to us all from time to time. A payday loan might be a good solution to receive cash fast in certain situations. Payday loans are intended to assist those who have a regular income and should not be used to pay off other debts. Payday loans are for urgent crises only, not for shopping or excess spending. To make sure a payday loan is the right option for you, double-check that you meet the eligibility criteria detailed above.

What happens if I can’t pay my payday loan back?

The consequences of failing to repay a payday loan within the agreed-upon time range might be severe. If your payment is left unpaid, the lender or your bank will charge you more fees. The amount you owe will only grow until it is paid in full. They may also submit your account to a collection agency, which might also charge you a fee. It will be reported to your credit bureau as well, which will damage your credit score.

Getting your credit score damaged will weaken your chances of getting a loan in the future, so this should not be taken lightly. If you expect to bump into difficulties repaying your loan on time, you should contact your lender before it happens. Lenders are often willing to help you out by offering an extension on your repayment, setting up an alternative repayment plan with lower repayments, and so on. This will protect your credit score and may even help you avoid late repayment fees.

Are payday loans expensive?

Payday loans can have hefty interest rates and fees, however, the amount you must repay may not be excessive due to the short term of the loan. For example, if you borrow $100 for 1 month with an annual interest rate of 442%, you must repay $117. The APR is a lot higher than the typical 21 percent interest rate on a credit card cash advance or overdraft, but the $17 interest you pay is pretty affordable.

If you are unable to repay the loan within the agreed-upon timeframe, however, costs and penalties could skyrocket. So, if you’re thinking about getting a payday loan, make sure you can pay it back on time, or you’ll end up more anxious since you owe more money than you planned for.