Payday loans are usually for small amounts of money, usually a few hundred, to get you through a sudden crisis until your next paycheck. The price of such loans is quite high and reaches a thousand percentage points or more of interest annually.
However, these loans are very popular. You will find clients who take out five to six such loans each year. People take these loans for many reasons. As mentioned above, to get you through a sudden financial crisis, such as an unexpected hospital bill or college fees. These loans are also used to pay late fees on credit card bills or overdraft fees on your bank accounts. They are popular because the money goes into your bank account almost the instant you apply for one. Past credit history is not a problem, even if it is bad.
Pay off a payday loan
The loan does not have to be repaid in cash on the due date. You just need to make sure there is enough in your bank account to cover the loan amount and interest, which the lender will automatically withdraw from your account on the repayment date.
Normally, the money that was past due plus the amount of interest must be paid within the month.
Some lenders allow you to choose the payment schedule
Some lenders offer a continuous payment option, whereby you give them the authority to make repeated attempts to participate or the full amount due from your bank account after the payment date.
When does it make sense to take out a payday loan?
A payday loan makes sense if and only if you can pay it back on the agreed payment date. They are very expensive once they cross the repayment date. Lenders may offer to renew the loan to the next month and beyond, but this is just a sales ploy and an attempt to get you to pay more than is necessary. A good creditor would freeze fees and interest no later than two months from the date of the last payment. And you’d better stay with that.
How to choose a payday lender
Shop around between different lenders to get the best interest rate.
Do not opt for lenders that offer deferments
· Do not take several loans at the same time. Don’t take one to pay for another.
Check to see if the lender is registered with a trade body because trade bodies have statutes that bind their members to strict rules. One of the points of these letters is that they will treat cases of financial difficulty sympathetically and positively.
· You should consider the terms and conditions of the loan. Typically, payday loans have to be repaid within 15 to 90 days. So choose that payday loan company whose loan repayment period is comfortable for you. Therefore, the best option is to compare the terms and conditions of different payday loan companies and choose the one whose terms are most favorable to you.
Collection of debts beyond the date of the extended payday
In such a scenario, the lender may approach a debt collection agency to collect the debt on your behalf.
A research report shows that millennials, those born after 1982, are more likely to have availed of payday loans due to their poor credit history. The high cost of payday loans contributes to your poor credit history, making it seem like a no-win situation. Therefore, cheaper forms of financing are not available to them, because these institutions verify the credit history of their clients before disbursing the loan. The relative ease with which a payday loan can be obtained makes it attractive to millennials.