Payday Loans – How To Choose A Lender
Most of us have experienced a minor crisis which called for
immediate cash. If you have been in this position you may
have considered taking out a payday loan, also known as a
cash advance or paycheck loan. It's a well known fact that
these loans feature steep finance charges, obligating the
borrower to repay the debt at an annualized interest rate
of over 900%. Because of the high cost of this form of
borrowing, payday loans should only be used as a last
resort. Using them frequently can trap a person in a
dangerous cycle of debt.
If you decide on a cash advance loan you have a number of
options. To the dismay of many lawmakers, this form of
lending has proliferated throughout the US and Canada, and
those who don't have local access to a lender can easily
find one online. In fact, your online payday loan options
are so abundant that you may have some difficulty in
settling upon a lender. The following are some unique
features of payday loans, and a few guidelines to follow
when getting one.
Exactly how high are the finance charges? A typical $250
payday loan carries finance charges from about $40 to $75,
which translates into an APR of 400% to 800%. Not much of
a bargain, but you can find significant differences from
lender to lender.
One criteria you can use to compare payday loan companies
is the maximum amount they will lend. The minimum amount
is normally around $200, with the upper limit being
somewhere around $2000. The precise amount will be
determined by several factors including your income and
work history. In many cases you will be able to increase
the maximum amount for which you are eligible by building a
history with the lender. Take care not to borrow more than
you can afford to repay on the specified date, or you will
incur even more finance charges.
How quickly will you receive your money? If you get the
cash advance in person at a local establishment, you will
have the cash as soon as you are approved. Online lenders
take slightly longer, with the next business day being the
norm. Some companies offer money wired into your account
on the same business day provided you receive approval
before a certain time, for instance 2:00 pm. You will
probably pay more in fees for same-day service.
The minimum monthly income requirement for a payday loan
can be as low as $800, not a big issue for most full time
workers. Most lenders will not run a credit check;
however, many of them use some type of tracking service
that verifies identity and other information given by the
loan applicant.
What if you are self employed or living on a fixed income
like a pension or social security? Not all lenders will
extend credit for this type of income, but you can find one
with some persistence. In the event that you receive some
non-traditional form of income that you want considered,
the lender will verify the income by looking at your bank
statements.
Do you happen to have access to a fax machine? With many
payday loan companies, you won't need it. "No Fax" lenders
are the norm these days. While some lenders may require
you to fax proof of income, most of the time everything can
be verified online, saving valuable time in getting your
money which can be deposited directly into your checking or
savings account.
In the event you cannot pay off the cash advance on your
next payday, most lenders will allow you to roll over the
balance several times. Beware of doing this at all costs,
as the already expensive finance charges can multiply
quickly and make the loan even more difficult to repay.
Despite opposition from a number of lawmakers, the payday
loan industry is booming. These "lenders of last resort"
provide a needed service for a growing segment of the
population- low to middle income workers who have
difficulty obtaining more traditional loans because of
their credit history and income level. Before you choose a
payday loan, investigate any and all other sources of
funding available. Choose a lender that has been in
business for at least several years and is up front about
all of their fees and policies. Don't make a practice of
using the loans regularly, and try to avoid extending loans
beyond the initial repayment period. Finally, work to
improve your credit score so that if financial difficulties
arise in the future you will have a less expensive way to
deal with them.
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Gregg Pennington writes articles on a number of topics
including mortgages, loan consolidation, and payday loans.
For more information about payday loans and cash advance
loans visit
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