Adverts from payday loans are everywhere, claiming to be the quick fix you need if you need a quick cash fix. But don’t be fooled by the assumed idea of ‘free money’ from a payday loan. Many have been caught out when borrowing from these companies without care or consideration. Here are some very important things to deliberate before you commit yourself to a payday loan.
Don’t delay your payments
This can be the killer for many who have sought the comfort of a short-term loan. The APR, which is the annual percentage rate, looks almost unbelievable. By delaying the payment by only 3 months, with even the lowest APRs in the payday loan industry, you can be paying around 425% of your original loan. Make the returning payment in one lump sum on, or even before, the agreed date with your lender to avoid any late fees.
The adverts clearly state that the APR is in the thousands, but some can be quite happy to ignore it. Don’t stick your head in the sand. They are as real as any loan. Because you pay per £100 that you borrow, only borrow the bare minimum that you need. Don’t round it up and don’t get more ‘just in case’. The more you borrow, the more you have to make to pay back. Make sure that the deal you have made shows exactly what you will pay back and at what date.
Do you need cash or credit?
Credit cards, at a quick glance, are better than payday loans. Not only are the interest rates lower, but on most credit cards, there is no interest rate if you pay the full amount within the allotted time. But they are only valid in certain places (although this list isn’t exactly small!). Not everyone can get a credit card either. Payday loans, on the other hand, come in the form of real cash to spend as you see fit. Only get a payday loan if you need the cash, rather than the credit.
Look out for scams
Although scam businesses are being spotted and stopped more easily now, there are still a few that have slipped through the net. There are two main things to look out for an APR lower than 1500% and companies that require you to pay an upfront fee. Use a trusted site with reviews rather than a suspicious e-mail that might have squeezed its way past your spam filter.
Councilors are calling for caps on payday loan interest rates, which are getting increasingly higher due to competition. There is the risk of getting yourself into even more debt, so it pays to shop around first to find the cheapest deal. Short-term money problems can affect any of us through unexpected circumstances, and payday loans can sometimes be the answer.