There are several things that you need to consider before applying for payday loans online. Since there are a lot of options on the internet, you need to be vigilant before dealing with any lender.
If you are interested to apply for a payday loan online, or someone you know is in need of a loan, you need to read further. In this post, we’ll look into how you can avoid the pitfalls and avoid being scammed by an illegitimate lender when applying for an unsecured loan like payday loans.
What you need to understand about payday loans
Payday loans are a different type of credit because it is offered in small amounts and paid with high interest. It is immediately due within two to four weeks or on your next payday.
High interest means that you are paying an annual percentage rate (APR) of about 400 percent. The high fees and interest that come with it make it ideal only for unexpected emergencies and should be used only to tide you up until your next payday.
A survey conducted by The Pew Charitable Trusts found that the majority of borrowers in the United States use it for their ordinary living expenses for the next few months and not for emergencies. On average, a borrower remains in debt for about five months in a year.
What are its features?
- Payday loans are small loans that are limited to $500 up to $1, 000. Some areas offer a slight difference in the loan they offer. Check how much is offered in your area.
- You have to pay for it only for one time on your next salary. Usually, payment is made two to four weeks after you received the loan. The due date is found in your agreement with the lender.
- You can issue an authorization to electronically debit from your bank account or issue a post-dated check to repay the loan. It includes all the loan amount, fees, and interest. They can take out the amount from your account if you don’t pay it on the due date.
- You can receive the loan through check or cash. They can deposit it to your bank account or prepaid card.
- There is no consideration when it comes to your financial obligation. You need to pay the loan while meeting your other expenses.
- Some lenders offer a rollover or renewal of your loan if you cannot make it on the due date. This way, you pay all the fees and interests only and continue with the loan.
- Other lenders may offer an installment as a way to restructure your loan.
What do I need to provide for the application online?
You only need simple requirements to qualify for a loan online:
- A valid identification card.
- Reaching the legal age of 18.
- Proof of income.
- An active bank account.
How much does it cost?
Many states in the United States and provinces in Canada provide a cap for these loans. In most areas, the fees are $10 to $30 for each $100 borrowed.
If the APR is 400 percent, it equals to paying a fee of $15 per $100 in a period of two weeks. You need to expect that the interest with this short-term loan is higher than credit cards. APR for credit cards ranges between 12 to 30 percent.
Other Payday Terms that you need to know
Repayment plans are extended repayment plans offered by some lenders to borrowers. It is available only in some areas and lenders. Borrowers can have a repayment plan when they find it difficult to repay their loans.
Some lenders may ask for an additional fee while others do not. Some lenders may allow you to take more time to repay your loan without paying extra fees.
Depending on the regulations in your area, some lenders may charge you of late fees or a returned check fee if you are unable to pay on time. If your account goes beyond the payment, the bank may charge you of non-sufficient funds when your loan is due.
A rollover is allowed in some areas if you cannot make the payment on due time. The lender gives you ample time to repay the loan and ask you only of fees. Aside from the initial fee, the added fee is imposed for a rollover.