There have been a lot of articles about payday loans and payday lenders over the last few years, and many of them highlighted a few very bad actors in the industry. Today, with both federal and state regulations, payday loans are a safe, effective option for those needing short-term cash.
There are many myths about short term payday loans online that may actually stop people from taking advantage of this funding option. As with any type of financial tool they are not right for everyone, and not everyone will qualify. Getting the facts is always essential, as is reading about the process and learning as much as you can about the reputation of the lender.
Payday Loans Have Hidden Fees
This is both a myth and a truth depending on the lender you are working with. If you are using a website to complete an application for short term payday loans online, be sure to read all the information on fees and costs of the loan.
The top companies charge a flat fee per every 100 dollars advanced, typically at 15 to 20 dollars. This means if you borrow $100 with a $15 fee, you will repay $115 with your next paycheck.
Companies are required by law to disclose their fees, in writing, to their customers. Take the time to review this information before accepting the advance or within the period allowed to cancel the advance without any costs.
Lenders Don’t Care
With the top companies offering short term payday loans online you will find there are options to repay the loan and the fees. Typically a company will allow a customer to repay back over one more pay period as long as some payment is made on the initial terms of the agreement.
Calling the company in advance if you know your check will not cover the repayment is important. You will still pay the fee on any balance for the next pay period, so paying off as much as possible is always in your best interest.
Payday Loans Cost More
When used for short-term cash when the borrower repays the loan with their next check a payday loan from the example above would be 15% interest in that time period. This is significantly lower than an NSF check and merchant fees, which could be as much as $50 or more. Compare this to a credit card which may have an interest rate in the 20% range, plus additional late fees and other fees.
By looking carefully at the intended purpose of payday loans, and borrowing only what is needed, these loans are an effective tool when financial emergencies occur.