How to Use Payday Loans: 7 Basic Rules
Payday loans are a profitable option for those who cannot or do not want to borrow money from a bank, for example, due to a bad credit history, lack of free time or references from work. Unlike banking institutions, microfinance institutions do not impose many requirements on borrowers – everyone who is at least 18 years old can be eligible for such a loan.
Microfinance institutions consider applications around the clock. As a result, you can get a lending decision within a few minutes, and you do not even need to go anywhere to sign contracts. If you decide to borrow cash online for the first time, take your time. Check out our financial security tips and advice on how to use payday loans.
When payday lenders are better than banks
You may need money urgently. It is great if you have financial safety cushion or the opportunity to borrow money from friends. But what if you don’t? The most common options are to go to a bank or apply for a payday loan.
When does it make sense to consider a payday loan?
- You need a small loan for a short time. Let’s say you found the right product with a good discount and you receive your next paycheck in a week. hen it makes sense to take out a payday loan and repay it as soon as you get paid;
- You have a bad or zero credit history. Banks often refuse to give a loan to customers who have had problems with loan repayment and those who have never taken loans. Microfinance institutions treat such borrowers more loyally.
- There is no way to verify income. You may be employed unofficially or be a freelancer. Banks usually require an income proof certificate, while payday loan providers do not.
- The money is needed urgently. The bank will process your request for a long time – up to a week. If you apply for a payday loan, you will have the money in your bank account as soon as the same day.
Compare loan terms and rates
A few years ago, the interest rate on short-term loans was huge. But increasing competition has forced companies to provide online payday loans at much better terms.
Most loan providers offer the following terms:
- amounts up to $1,000 (sometimes up to $2,500);
- lending periods for up to 31 days;
- loans typically cost 400% annual interest.
In some cases, first-time borrowers are eligible for zero interest loans – with no hidden conditions and additional requirements.
Recommendation: Do not borrow more than what is really needed. If the debt is not repaid within the previously selected period, the company will accrue interest.
Loan application tips
When you borrow money online, you need to follow a few simple recommendations:
- Provide only valid data. Payday loan providers claim to issue loans without any checks. This is not true – all information is verified. But the presence of negative factors (for example, a poor credit score) does not cause the application to be rejected. Unlike attempts to provide invalid information;
- Do not hide current outstanding debts – also for the above reason. In many microfinance institutions, you can qualify for a loan even if you have other loans from a bank or another microfinance company;
- Do not leave fields blank. Otherwise, the manager will contact you to clarify the information or the request will be automatically rejected;
- Use your personal bank account. Never use bank accounts of other people. An attempt to borrow money with someone else’s bank account will become a “against” factor for the scoring system;
- Spend 5-10 minutes on the website to study the terms and conditions for issuing and repaying a loan. The portals use systems that track user behavior. Instant application “tells” them that the client is not responsible at all.
The application form is filled out only once. To receive the second and subsequent loans, you just need to log in to your personal account. If you repay the first loan on time, the probability of loan rejection will be almost zero.
Debt repayment tips
The fastest and most profitable way to pay off a loan is to pay through your personal account. This is the most convenient for several reasons:
- No transaction fees;
- No need to enter details;
- T.he lender receives the money instantly.
Important: Processing a payment through a self-service terminal or Internet banking service can take up to 3-5 days.
Choose the best loan offer for your needs
In the USA, there are a huge number of microfinance institutions that issue payday loans to individuals. They differ in terms and conditions and also in the way they are issued. The requirements for borrowers also vary for different customers. The same amount can be received under completely different conditions.
Therefore, it is rather difficult to find a company that is best suited in a particular situation. You need to find out which lenders work in your city, study their terms and conditions, compare them with each other and determine the most profitable option. It is also important to study the reviews of other borrowers and check the reliability of the company.
Online connection services can help you in this situation. The system analyzes your inquiry and connects you to the right lender for your needs. You can easily compare offers with each other and choose the one that suits you best. You can start your application online around the clock with one single click:
Most borrowers prefer using connection services due to their numerous advantages:
- Such websites contain only up-to-date information about loans and only real customer reviews;
- Site specialists collect detailed information about loans and constantly supplement it;
- They have their own evaluation system based on a large number of parameters;
- Here you can also find useful articles for borrowers, financial news and ratings.
To make the loan beneficial, do not forget about the basic rules of financial literacy. Before applying for a loan, carefully study the contract to identify all the nuances and pitfalls. Plan ahead to pay off your debt and don’t take it on unless you’re sure you can pay it back on time.
Do not hide from the lender
If you are unable to make a payment due to financial difficulties, let the lender know. It is possible that they will be able to agree on changing the conditions. The lender is interested in loan repayment. Many companies meet their customers halfway and offer a loan extension.
Payday loans are one of the convenient ways to solve financial difficulties. When cooperating with a legitimate lender, you can remain confident in the security of your personal data. Use connection services that partner only with is reliable and proven organizations that have a license to issue loans online.
Choose your microfinance institution carefully. Check if it has a license to issue loans via the Internet. Illegal companies do not comply with the laws: they can set an interest that is higher than allowed. Also, if you delay payment, they can begin to threaten you. Or they may even be scammers who did not plan to issue a loan, but, on the contrary, want to steal money. For example, they will ask you to pay a fee for issuing a loan or they will ask you to dictate a code from SMS.
What else do you need to know in order not to regret taking a payday loan?
- Assess your financial capabilities soberly. Ask yourself if you will have money to pay off the loan on the due date agreed with the lender.
- Analyze whether the purpose of your loan is really necessary and important. Do not borrow for unnecessary purchases.
- Compare loan conditions in different companies and choose the best ones.
- Read the loan agreement carefully when applying for a loan: large and small print. Check if there are any hidden fees. Find out the interest rate and the total loan amount. If something in the contract seems suspicious, do not sign it.
- Pay off your loan early, if possible. In this case, you will overpay less. Most lenders allow early repayment with no penalties. Check it out in the contract.
- Do not take out a payday loan to pay off other loans and credit card debts. The debt problem will only get worse because payday loans come with higher interest rates. In this case, you should pay attention to debt consolidation.
- Take a loan from the same lender if you need the money again. Regular customers are offered special conditions.
Tags: finance, money, payday loans