A loan that you can obtain fast and that won’t expire until the payday following seems like a great idea. But how do they function? Do they represent the beginning of a long cycle of costly charges and high rate of interest?
It’s tempting stuck in a financial situation to search for the quickest solution. Payday loans appear simple however they usually come with additional fees that could cost you more than you anticipated this month.
As per the Consumer Financial Protection Bureau (CFPB) that nearly 25% of those who apply for payday loans fail to pay the loan, and over 80 percent have to take out money in the next 14 days. Follow these simple steps:
2. fill out the form
3. submit your request
What is a payday loan?
The data from the FDIC indicates that around 24 million people, or 11 percent of the population are not banking. That means they rely on financial services such as payday lenders.
When you’re driving around the city, you might have noticed the stores’ windows advertising “quick payday cash” and “no credit checks required.” Knowing the process of payday lending will help you make an informed choice about which payday loan is the most suitable choice for you.
Payday loans are loans that are short-term usually lasting two weeks. You can make an unpost-dated check or give your debit card’s number and then receive money the next day.
When the due date for the check arrives the loan provider will cash your check in order to pay for the loan in total. It is also possible for a return visit to the lending office to repay the loan cash in the event that you own the funds.
Payday loans could be more expensive than they seem at first glance, as they’re geared towards those who require cash immediately while waiting to be paid back. They charge higher interest rates and charges contrasted with a conventional bank loan.
What happens if I can’t pay a payday loan?
The median payday loan is $1000, and with a the astronomical rates of 26%, expenses can quickly add up as per the CFPB.
If you are unable to pay for your loan on the time of due You can request to extend the loan. The lender will consider this as another payday loan and charge the borrower a second round of fees.
Payday loans could also harm ones credit scores if it is impossible to pay the loan, according to Mellissa Slover-Athey, Director for Community Engagement for BridgePayday. “Depending on the conditions of the loan, you may be transferred to an agency for collection or a debt collector, and they could report you to credit reporting firms.”
Think about this scenario before you apply for a payday lending service:
Let’s say you require $200 to repair your car or medical expense, or any other expense that cannot wait. A payday lender charges you a fee of $30 for $200 you borrow. You send a post-dated cheque to a payday loaner and take the cash.
The date for loan repayment comes around, a different issue is happening and you’re unable to repay the $200. The lender is able to extend the loan but they charge the renewal fee of $30 plus an additional $30 late fee for the loan of $200. What happens if your next pay check isn’t as big than you had hoped? You might need to extend your loan with a fee of $30 plus the late fee of $30. Then you’ve only paid $150 for fees even though you only required only $200.
What are better options than a payday loan?
If you are looking to get money to pay to pay for your purchase or bill, you should take the time to research the most advantageous terms and rates. Like you’ve seen that payday lenders charge high fees and high rates of interest.
If you’re not sure you’re eligible, talk to your bank regarding the possibility of a personal loan. There are many banks that offer reasonable loans that let you take out the cash you require with a lower interest rate. You could also be eligible to get a credit line.
It is possible to use your checking account’s overdraft to fund the cost of a purchase. But be aware that the non-sufficient funds (NSF) charges will quickly accumulate in the event of multiple transactions. It is possible to link your savings account with your checking account to pay for any possible overdrafts.
Establishing the right financial habits prior to when you find yourself in a financial pinch will make those difficult budget times a bit easier. Make sure you pay yourself first by placing funds into an emergency fund to cover unexpected expenses. Even a little bit of money a week can add up to build an investment cushion.
If you are prone to not putting money into the emergency savings account, make an automatic transfer that will save money without needing to think about it. It is also possible to automatically transfer part from your direct deposits to an account for savings.
BridgePayday helps you automate your savings simple, thanks to BridgePayday’s “Round Up to save” program. Every time you make an purchase using the debit card you have, we will round up your transaction’s amount to the nearest dollar, and then transfer the difference into your savings account immediately. When you reach the time of year’s end, we match the savings you have made by 2 in the amount of $250.
Bridge Payday also offers a Secured VISA(tm) credit card to people who need to rebuild their credit. After you start saving, you are able to “borrow” from your own account using cash-secured credit cards. Cash-secured credit cards report transactions to credit reporting agencies, which could increase your credit score overall.