Internet Payday Loans

Copyright (c) 2008 Tim Staines

If you're short of cash, should you get a payday loan? Are they really that helpful?

They can be, if you know how to use them. You can get cash fast with them if you need to, but you need to be careful, because they're expensive. It's a law that payday loan businesses have to post interest rates prominently, so take careful note of the interest rate you're actually paying and make sure you know what you're getting into before you sign the contract.

Here are some things you should know before you decide to take out a payday loan:

Payday loans are expensive. Their annual percentage rates run from 200% to upwards of 800% or even more. Some approach 1000%. That's a lot of money. Even a cash advance off your credit card isn't going to cost you as much, usually. That's not to say that cash advances from credit cards are good, because that's not responsible behavior either. But if you must have money and you're in a pinch, even a credit card advance is better than a payday loan, usually. If you can borrow money from somewhere else, such as your bank, boss, a friend, family member, or any other source, it's likely that you'll get a better deal than you would from a payday lender.

If you decide after considering all your options that you still have to take a payday loan, shop around. You want the lowest annual percentage rate you can find, also known as an APR. One of the best ways to do this is to go online and check out payday lenders there, to see which of them has the best rates. Online competition is usually very intense, so it's likely that you'll get a better rate if you do some careful research here than if you simply walk into your neighborhood payday lender and take out a payday loan right then. The figures you compare should match in terms of their characteristics, for best comparison. For example, let's say a company tells you that you'll need to pay them $10 a week for every hundred dollars you borrow from them. You'll end up paying $521.43 in interest a year on a $100 cash advance with that setup, though. That's a lot more than the "$10 a week" sounds like at first not. In addition, make sure you know what other costs or fees will be charged you besides when you take out your cash advance.

Make sure you know every single penny you are going to pay before you sign. This way, you'll know how much are actually facing in terms of paying back when the time comes. You should also know what's going to happen if you have to roll over your loan, which will happen in the event you can't pay the balance all at once when the loan comes due.

Finally, read contract very carefully and ask questions if you're not sure of anything. Do this before you sign. Walk out of the lender's store with every single question answered, or don't sign. You should know that some lenders will try to rush you through the signing process so that the fine print gets by you, but don't let them. Take your time and read everything. If you have to, take an unsigned contract with you and show it to someone else who knows more about financial matters than you do if you need to. If the lender balks at any of this, walk away. There are many payday lenders vying for your business, so if you don't get every single question answered, you don't have to take it. You also don't want to sign something that you're going to be sorry for later.

Next, you need to know what's going to happen to you if you have to do what's called a "loan rollover." This happens if you don't have enough to pay back the loan in full on your next payday, and it's very expensive. Not only will your annual percentage rate shoot very high, but you continue to accrue fees and interest. If you have to keep rolling over your payday loan, you're going to continue to accrue interest and charges, and this will likely get you in deep trouble. Because of this, make sure you borrow only as much as you can repay on the due date and nothing more. If you don't think this is possible, don't even start.

The longer your cash advances are outstanding, the higher your APR is going to go. Therefore, you need to borrow not just the minimum cash possible to get you through a rough spot, but you need to keep the repayment date as close as possible, too. Know what the duration of the loan is before you sign, and note what the due date is.

If you haven't worked with this particular lender before, go to the Better Business Bureau's website before you decide to sign on with them and check out the business and its reputation. You can also check the lender out at your local Chamber of Commerce. Again, you have rights here and you need to make sure the lender is reputable.

If you decide that the payday lender you're going to use will be an online one, make sure the site is secure. There will usually be a "lock" symbol visible in the browser window to the right if the site is secure, and the URL itself will start with "https" instead of "http." The "S" signifies that the site is secure. Most online providers use secure sites, but check to make sure, because your information is in danger if it's not. You need to use a lender whose site is secure.

If you use an online lender, the procedure is the same as with a local payday lender. You should be able to read contract and all the fine print in full before you sign anything, and lender contact information should be clearly visible, including a phone number. It's a good idea to call their phone number and check other customer service before you sign anything, too, so that you know you're safe. You can also clarify their policies with them. You should know all charges and fees you'll be required to pay before you provide any personal data. Print out the relevant details and read them carefully; printing out and keeping a hard copy is a good idea, too, so that if there are any discrepancies later, you'll have something in print to verify everything.

Payday loans can be very helpful in the short-term, providing you absolutely need to use them. However, make sure you can pay them back right away so they don't get locked into an endless cycle of debt. You should also know that many other sources are much better choices if you have them available, including credit card advances. If you do decide to take out a payday loan, make sure you can pay it back right away and that you know everything you're responsible for before you do so. If you're at all unsure, walk away. It's not worth a small amount of money up front if you're going to be locked into a cycle of endless debt you can't get out of.

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