Do Online Payday Loans Make Sense?

Are online payday loans a viable substitute to conventional loans? What are the costs of these short-term loans when compared to bank loans, personal credit lines and credit cards? More importantly, should they be the first option, or the last recourse? Well, it really depends upon the individual's financial position. In fact, those with a poor credit rating are welcomed with open arms by these short-term loan providers. This is because the applicant's credit rating has no bearing on whether they are approved or not. Surprised to hear that an individual's credit rating plays no role in the payday loan approval process? Don't be! Payday loan companies base their decision to lend money on some simple and straightforward criteria, criteria that allows them to boast over a 90% approval rate.

Payday loans aren't inexpensive. However, they are quick, easy-to-use, easy to apply for and relatively safe. In essence, they are an easy source of credit for those who would otherwise not be able to borrow money due to a lackluster credit rating. Ultimately, they allow individuals to tap into immediate credit. In fact, in some instances, they empower individuals to rebuild their credit rating. However, that depends upon the type of payday loan company and the fees they charge. So what are some of the areas to be aware of? Most importantly, what should anyone do when thinking of applying for these short-term loans?

Interest Rates Must be Clearly Defined

Granted, credit card companies can charge exorbitant interest rates on cash advances, but that's nothing compared to the high costs associated with some online payday loans. Hidden fees and penalties can obscure costs and lead individuals to think the loans are less expensive than they actually are. The best approach is to work with a payday loan company that clearly defines the interest rates upfront.

Application Process Must be Simple!

Short-term loan providers should provide all pertinent information concerning fees and late penalties during the application process. A good rule of thumb is to only work with companies that provide the opportunity to speak with a loan officer. Look for "no fax" payday loan providers, ones that allow applicants to fill out all information online. What's needed? Applicants must be residents or citizens of the country where the company is located. They must be currently employed. They must be of legal age, have a working telephone number and an address. Last but not least, they must have a bank account that will accept direct deposit of the loan.

Fees and Penalties Must be Well Understood

It's essential to work with a company that actually rewards prompt payment or early payment of the loan. Individuals should never be penalized or face fees for being proactive in repayment. However, this is often the exception to the rule. For the most part, online providers want borrowers to pay back their loans on time. Regardless, it's essential that applicants have a clear understanding of the fees and penalties for late payment. As such, it's a good idea to calculate the entire cost of the loan and put a plan in motion to pay off that loan as soon as possible.

Be sure to work with companies who advocate transparency in their process. Be leery of any enterprise that isn't willing to share their interest rates, costs, fees and penalties upfront. Finally, be sure to work with an enterprise that provides the opportunity to speak with a loan officer, one that can answer all questions relating to the company and their processes.

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