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Things to Consider before getting a Payday Loan

Written by: Greg Lewis

Finding a payday loan provider has never been easier. Go to your favorite search engine and enter "PaydayLoan". You'll find that the popular search engines will return millions of indexed pages. The choices of websites about payday loans are emence. This can only add confusion to an already stressfull time for you.



You may have had an unexpected event or made some poor choices which has caused your cash shortage and financial stress. Now more than ever, you need to be very careful when choosing a payday loan provider. Your stress and anxiety over your finances can lead to poor choices in payday loan providers.



Be very careful when making your payday loan purchase. A number of considerations need to be made when looking for these types of short term loans. Payday loans should only be considered as a SHORT TERM solution to your financial crisis.



You need to understand the ramifications of this type of loan. These are high risk, short term loans made by finance companies, check cashers,and banks. Because of the high risk, no collateral nature of the loan, you will be required to pay a very high interest rate. Some annual percentage interest rates can easily exceed 460%.



1) How much will the loan cost?



As an example, if you were to make a $500 loan with a company who charges you a fee of $20 per $100 borrowed, you would be required to pay $100 every 2 weeks in interest fees. If it takes you 1 year to pay back the payday loan, it would cost you $3100 in interest and principle. This is an extreme example but I wanted to give you the truth regarding the costs of payday loans.



With this in mind, the first consideration that needs to be made before you get your payday loan or even fill out any applications is, "How much does it cost?"



2) Who am I giving my financial information to?



There are a myriad of sites on the web offering payday loans or appearing to offer their loan services to you. Not all websites asking for your personal financial information are actual payday loan providers. Some are lead generating sites for the payday loan industry. Or even worse, they may be bogus sites looking for for your personal financial information for their own illegal use.



Again, I am not trying to scare you. I just want you to be well aware of the pitfalls that can be associated with giving your personal financial information to unknown identities. Most websites will tell you if their are the actual payday lender. They will either tell you on their home page or on their FAQ page. Please keep in mind, that payday loan providers can and will have mulitple websites selling their services. So, do not be alarmed if you see multiple websites that have similar content or have a familiar feel to them.



3) What are the minimum requirements for the payday loan?



Payday loan providers will give you their minimum requirements for their services. Employment, income, checking account, citizenery, age, and other requirements that may apply.



Make sure you meeting all requirements before you apply for the payday loan. Many providers enter applicants into a data base. This data base is shared and used by many lenders. Mulitple applications can have an effect on whether your payday loan application is accepted.



4) How much is the maximum payday loan available?



You'll find payday loan sites offering $200, $500, or even $1500 payday loans. Due to the high risk nature of payday loans, do not expect to receive the maximum loan amount on your first loan. You will not be given the max loan until you have proven to the payday loan provider your trustworthiness. This is usually proven after you have completed mulitple loans. They will slowly bump up your available loan amount only after they are convinced their risk has been reduced. This is no different than any other type of loan or credit card. More credit is made available once you have proven yourself.



5) How much does the payday loan cost?



This is where you should be very carefull. Finance may or may not be listed on the provider's website. Fees will range anywhere from $10 - $30 per $100 borrowed.



If they the interest are not listed on the website and they only offer that they are lower than overdraft fees and late charges, they most likely charge $25 to $30 per $100 borrowed.



The industry trend for online payday loan providers offering cheaper loan rates is changing. You may now see they no longer offer no credit check payday loans. Again, it is all due to the risk you present to them. By checking your credit, they can predetermine your credit risk. Even though they charge lower rates, you may not be able to get a payday loan through them because of your poor credit.



No credit check payday loan providers will normally charge you $20 to $30 per $100 borrowed.



6) What are their repayment terms?



I cannot stress this enough, you should only borrow what you need and only what you can afford to pay back on your very next payday.



Payday loan providers will normally have multiple payment terms. Make sure you are very clear on what they are and what requirements they may have before you complete their online payday loan application.



- You can payoff your loan on your next payday. Some providers may require you to complete and fax them your written authorization to withdraw the funds on the agreed upon due date. They may even automatically withdraw the entire amount (including interest fees) on your next payday. Unless you require an extension.

- If you need to extend your loan, they will require you to log on to your account and complete a new contract if you wish to extend your loan. If you are short on cash, most if not all, lenders with gladly allow you to extend your loan. In this case, the interest fess will be automatically be debited from your checking account.

- You may also have the option of paying down your loan. You extend your loan and pay a percentage of the principle loan amount. Some payday loan providers will do this automatically or you need to request this be done. This option is recommended if you are unable to completely pay your loan off.

Hopefully, this paper will help you in making a better payday loan provider choice. This is not intended as financial advice. Its only intent is to help you make a better, more educated choice when considering a payday loan.



About the author:

Greg Lewis is owner and webmaster of w3paydayloan.com a payday loan educational resource directory. Helping payday loan borrowers make a better, more educated borrowing decision. Submit your own article at W3 Payday Loan.


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