Payday loans can be a great way to access the funds you need before your next payday comes around. They are generally easy to qualify for and quick to get, and since they are short-term loans, they are simple to pay off by using funds from your next paycheck.
That being said, with so many lenders out there, some payday loans can turn into full-fledged nightmares. Though payday loans can be beneficial if obtained the right way, you’ll want to make sure you know what to do to avoid getting into a payday loan catastrophe.
Find A Reputable Lender
Mostly, avoiding harm with a payday loan is all about finding a payday lender you can trust. It’s a good idea to research your lender and the qualifications they require for you to get a payday loan. If you aren’t asked for a verifiable source of income, for example, your lender is likely not trustworthy.
On the other hand, some lenders make you jump through too many hoops before actually depositing the loan amount into your account. If your lender requires extensive financial history, asks to run a credit check, or will take multiple days to deposit the loan amount, it’s wise to find a better lender.
Most of all, you want to find a lender who outlines their terms clearly. You need to be aware of the fees and all the terms before you take out a loan, and the lender should be able to provide all of this information before lending to you.
Some people make another big payday loan mistake by opting for a third-party lender rather than a direct one. Third-party lenders, however, come with several negative side effects that you should be aware of.
Third-party lenders can make getting and paying off a loan much more complicated than it needs to be. They will almost always require an additional fee that you wouldn’t pay with a direct lender because they are working as a middleman to connect you with direct lenders. They also are much less concerned with proper rates or loan limits, you may not be getting information that is compliant with state lending laws. To avoid unnecessary fees and non-compliant loans, it’s best to connect with the direct lender who will ensure your loan stays within lawful limitations.
Additionally, third-party lenders make it difficult for you to keep your information private. They operate by sending your financial and other personal information to several lenders until one agrees to lend you a payday loan. By working with a direct lender, you avoid giving your personal information to several different unknown lenders.
Avoid Multiple Lenders
In many states, the same lender isn’t allowed to give people multiple payday loans at a time because having multiple short-term loans can make it difficult to pay them off. Most lenders are prohibited by law from giving you a second loan until the first one is paid off. Because of this, some people seek out a second lender for an additional payday loan when they feel they need one.
This can be dangerous financially, as holding multiple loans with different lenders can complicate loan agreements, payment dates, fees, and more. This can also further conflict with legal requirements depending on state laws regarding payday loans. It’s best to stick to one lender who can advise you on the best course of action to take when you need to borrow more money.
Don’t Default On Payments
One of the final ways you can avoid a payday loan nightmare is by simply paying back your loan on time. This isn’t usually a problem for most people, as the loan is short-term and allows you to use your next paycheck to pay it off. However, if you end up working with multiple lenders, going through a third-party lender, or not getting clear enough information on loan terms as mentioned above, it can be harder to make sure you’re paying your loan off on time.
Defaulting on payments can have several negative side effects, from incurring additional fees to negatively impacting your credit score. By making sure you can pay your loan off on time, your credit score won’t be affected and you can stay out of further debt.
As you work with a reliable lender, avoid third-party and multiple lenders, and pay off your loan on time, you can avoid payday loan nightmares. The benefit of payday loans is that they are otherwise very straightforward and simple to pay off, and they can be a great option for those who know how to get them the right way.