UNDERSTANDING PayDay Loans: Does it help or not
What are PayDay Loans?
PayDay loans are small cash assist options available for short term without much documentation or hectic process. These loans are provided by lenders and are normal option for those who don’t have a credit history or poor credit record.
It is a common way for most salaried people in USA to avail using PayDay loans for sudden financial crisis as it is available online and can get you funds within a short span of time. BUT it is not that a good option as it has various aspects which one needs to consider before opting for it. We will discuss it.
How much you can borrow with PayDay Loans?
PayDay loans can get you funds ranging around $100 to $500 and you need to return the money within a couple of weeks or so. To get a PayDay loan, you can apply online as various loan providers are available online and one can easily apply by filling the form available at the lenders website.
Understand the FEE structure
As these are quick funds with little documentation, it carries higher Annual Percentage Rate. In some cases, it exceeds 100% and can be a costlier option. For example, if you borrow $100 then the lender will charge $15 as fee that fee equates to an annual percentage rate of almost 400% and you need to repay it within couple of weeks or given time.
So you know how much you will gonna pay. Most of these loans are available for 30 days or less and you have to repay them on time to avoid any penalties.
A few years back, lenders were taking advantage of hard working poor people by charging hidden fee and taking hefty funds from defaulters but now things have changed a bit. CFPB’s has put in place regulations for lenders.
Do “Credit Score” matters with PayDay loans?
As these are short term loans for sudden or urgent needs, credit score doesn’t have much importance while applying. So even borrowers with poor credit score can also apply for these loans and get funds within a short span of time.
DOES IT REALLY SOLVE THE PROBLEM or is it a trap?
To be honest, these PayPal loans aren’t that helpful as they have higher fee and short time to repay it. Higher interest rates means, you will be paying more which will worsen your financial condition. In case the borrower fails to repay it on time, the lenders tend to charge hefty fee on defaulters which adds more burden on the borrower. And in most cases, borrowers ending up taking another loan to pay the previous one. So be careful while taking a PayDay loan.
If not PayDay Loans, what can help you?
As we have discussed earlier, PayDay loans are lucrative fund assist but can add more worries than solving it. So should one do in case of financial trouble and don’t want a PayDay loan? We have a few tips that might help you in managing financial crunches in a better way:
- Negotiation with creditors
As most of the Americans are in debt in one form or the other, meeting day to day needs and paying bills when you are in financial trouble, do become quite difficult. In such situations, you can reach out to your creditors and negotiate for longer timeline. That can work in some cases.
- Family and Friends
In tough times, sharing your situation with your close ones can help. Asking for help from your family or relatives can be handy as but make sure to return the money on soon as delays can hamper your relationship. You can form a credit circle among your among group of people you trust. This is a wise option and can help you in long term as the circle collect money for one person each month.
- Planning expenses
You should plan your expanses and use your earned cash wisely. You should plan your expenses and avoid spending money on unnecessary things. So if you plan well then you can save funds for future.
- Advance from Company or Employer
Asking for advance funds from your employer can also help if you have a good impression on your boss. Yeah if your boss knows what it feels like to be short on funds during financial crunches, he or she might help. Or you can ask for some overtime work to get extra cash.
- Borrow from Credit Union
Instead of PayDap loans, one can opt for loan from Credit Union which has lower fee as compared to PayDay loans and they do allow relevant time to repay the money. Some credit unions also offer PayDay loans alternate plans that are quite handy. But for this, you need to maintain a good credit score and have a bit of time to wait for the approval.
- Credit Card
If you have a credit card, utilize it instead of getting PayDay loans. With credit cards, you can pay your bills and will have sufficient time to repay it along with lower fee. But utilize it wisely as delayed credit card payments do affect your credit score.
- Maintain good credit score
Having a good credit score helps in many ways. Always try to repay the loans or credit on time. Good credit score will open various credit options for you and even at manageable interest rates.
Like it or hate it, PayDay loans are quite popular option for salaried individuals in USA to avail money. And can be handy if you can manage to repay it on time. But avoid considering it as your prime option for getting money. Try to plan your expanses and save a bit for future.