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Five Secrets To Know Before Taking A Payday Loan

May 23, 2018
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Learn Payday Lender Secrets

Payday lenders generally do not check credit and can deposit $1000 cash into a checking account over night. Sounds great, right? So what's the catch?

First, not all lenders are the same. Second, these loans are not cheap. Check out the secrets behind payday loans before you borrow.

  1. It's better to wait and skip the loan.

    Payday loans are not cheap. Lenders generally charge a flat fee per $100. Fees can range from $15 to $45. So although it may sound cheap to get $100 now for $115 later this is not cheap. The actual APR for this loan is over 400%. This is crazy high compared to other loans like credit cards which are around 15.99%. Payday loans only make sense if you must have the money now.

  2. Your checking account will be automatically debited on payday.

    Payday lenders get paid first. Instead of lending money based on credit history they lend money based on the their ability to get paid first. They require direct access to your checking account. This means that the moment a paycheck arrives they immediately withdraw fees and principal.

  3. State licensed lenders are generally safer.

    Not all lenders are the same. Many online lenders are largely unregulated operating outside of the US. This makes it very difficult if things go wrong. Remeber you have given the lender access to your checking account. There are regulated lenders. These lenders are licensed by states and must follow regulations regarding collections and loan renewals or risk losing their license.

  4. Payday loans are due in full on your next payday.

    Payday loans are due in full on payday. This means a $300 advance with $30 in fees per $100 today will make your paycheck $390 lighter come payday. This is a lot of money so make sure you can manage your expenses to be able to pay off the entire loan at payday.

  5. An installment loan may reduce costs.

    Payday lenders make money from loan renewals by charging fees on fees. A $300 loan with $30 in fees per $100 will make your paycheck $390 lighter at your next payday but if you roll it over one payday it will cost you $507 on the second payday. This means $300 borrowed is now costing $207 in fees after two paydays. The difference between installment loans and payday loans is that they are not due in full at your next payday. Instead, fees plus a portion of the loan is deducted automatically from a checking account. These loans are still expensive so only take one if it's necessary and it's still best to stick with state licensed lenders.

Short term loans can help in a bind. They don't require good credit and get cash into checking account over night. All short term loans whether it's an installment loan or a payday loan are expensive. It's always better to wait until payday instead of taking out a loan if one can wait.

If it's an emergency and cash is needed then we prefer to go with a state licensed lender. If you can pay your loan back in full at the next payday a payday loan may be a good option. If you cannot pay it in full then an installment loan may be a better option. See payday or installment loans for additional information or select your state from below to find state licensed installment lenders in your state.

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