Payday Loans Explained
Do you ever run out of money before payday? During this time, your bills still come due. You need money, but your boss will not budge. In some states, you can get a loan into your bank account within the hour. However, there are things you should know before getting a payday loan.
How Do Payday Loans Work and What Will One Cost Me?
Payday loans differ from other loans. Either you can get a payday loan in person or you can go online and apply for one. There are different laws in different states about payday loans. These laws limit the amount you can borrow and/or how much interest and fees the lender can impose. Some states do not allow payday loans. Dependent upon state laws, a payday loan can range between $50 and $1000. Thirty-two states allow payday loans but with a capped loan amount. Some other states limit payday loans. For example, loan amounts are capped at 25% of the borrower’s income. Some states do not have statutory provisions about payday loans. One needs to be very careful when getting a payday loan.
How Do I Repay a Payday Loan and Will It Affect My Credit?
Most of the time, one is required to repay the loan by one’s next payday. Lenders vary their repayment terms, so be sure and ask for the due date or check it in the agreement. Since different lenders have different terms, you may have options to pay off the balance. These can include a postdated check, your next paycheck, paying online or debiting your bank account. Twenty percent of borrowers do not pay the balance and are in default. Over 80 percent of these loans are “rolled over”, meaning that the loans are renewed within 30 days. A rollover is legal in some states, in others it is not. Renewing the loan (rolling it over) provides the borrower added time to fulfill the loan agreement. There are additional fees if the borrower needs added time. One’s credit score does not change when applying for one of these loans. They also will not appear on your credit report when you accept the loan. They will appear on the report if you default and they sell your account to the collection agency.
What Are Some Alternatives to a Payday Loan?
Alternatives to payday loans include personal loans (get a personal loan from Zebra), loans from family or friends, and high-risk credit cards. Some of these alternatives have a higher rate of interest than personal loans. However, the interest is lower than what a payday loan has to offer. Sometimes borrowing from family members is not the best solution either. Payday loans are a good alternative if someone has short-term financial problems. Dependence upon them becomes very expensive.