Shopping for an online payday loan lender is just as important as shopping for a bank or other financial institution. Every payday lender offers different rates and fees, and that is why it is important to shop around. Even though the loan is only going to be short term, you don’t want to get yourself into trouble by getting a loan that you can’t afford.
Rates and Fees
Many people extol on the fact that payday loans charge extremely high rates and fees. But this statement isn’t quite true. In fact, the FDIC has strict guidelines in place to regulate payday lenders to ensure that they do not rip off customers. As such, you can never pay more than specific maximums set by the government.
However, the reason that people do complain is that when comparing payday loan rates as a percentage of the amount borrowed, they can be high. That is why it is important to borrow only what you need any pay it back in time.
When shopping for a loan, get the specifics on the rates and fees, and what the period of time for the loan is. Many lenders charge smaller fees if the loan is for 1 or 2 days, and larger fees if the loan is for 1 to 2 weeks.
Since payday loans are designed to be short term, when you calculate an annual percentage rate (APR) like you would for a traditional loan, the numbers stop making sense. For example, a payday loan might have a 15% interest rate for a two week loan. Multiplying that out for a full year would make it 3,685%. That just doesn’t make sense.
What Happens if You Don’t Pay
Finally, getting a payday loan is just like getting any other type of loan. If you don’t pay your loan off, you can have all sorts of repercussions, including incurring bank fees and getting a negative credit score. That is why it is important that you treat a payday loan just like any other line of credit it and use it responsibly.
