What You Need to Know Before Getting a Payday Loan

Payday loans (also called salary loans, small dollar loans, payday advances, or short term loans) present an unsecured, short-term, small credit. Secured Loans are slightly different to this, as you are bound to offer something you own as repayment if you cannot pay the loan back in money form. Unsecured loans often are given to you in one, as and when you need it. These loans are treated differently by legislation and federal systems, so the rules vary widely between different states, countries, or provinces. If you want to get a payday loan, make sure to read out the following facts on this issue.

Things to Know Before You Get a Payday Loan

There are numerous things that you have to know before you borrow some money from an institution. First, you have to know the interest rates of the amount you’re about to loan. Also, check if the right loan for you is payday loan or maybe you can also try personal loans. Look for a valid lender online and compare and contrast each payday lenders to make sure you are not being charged too high when it comes to interests or you are not being limited to such a small amount. Don’t forget to check out reviews of the company as well, for example, this review of My Canada Payday. These can offer valuable information such as any controversies the loan company may have been involved in.

Alternatives to Payday Loans

Since payday loans can somewhat lead to becoming more problematic and can bring the person into serious indebtedness, some alternatives that they can choose in order to avoid incurring further debts would be to either ask for a cash advance from their employers, borrow some money from their friends and loved ones, borrow social fund, and perhaps, use a credit card where the interest isn’t too high and risky.

Payday Loans vs. Personal Loans

Payday loans usually come in small amounts. They are considered short term since the lenders are expected to be paid once the next paycheck has been credited to debtor’s account. Payday loans are usually high-cost because of the interest rates. Personal loans, however, are also short-term loans but unlike payday loans, they have a fixed period of when they should pay and at a fixed interest rate. The banks usually ask for the credit of the debtor and if the debtor has bad credit, he will likely get a smaller amount of loans.

Payday Loans vs. Installment Loans

Installment loans are usually paid over a number of scheduled days. The lender requires the credit information of the debtor and usually takes about a day or two for the loan to be approved. Installment loans usually involve chattel mortgages and are usually paid monthly upon giving a down payment. Furthermore, installment loans offer low interest rates unlike that of payday loans.

Rate Examples, Penalty Fees, Credit Score Impact

Usually, payday loan rates vary around $17.50 for every loan of $100. There are around 400% annual interest rates in payday loans. Lenders are not allowed to charge a penalty fee if the loan is paid ahead of time or paid at the deadline.

However, if you fail to pay at the given schedule, this could lead to losing your opportunity to acquire bank accounts. If you have too many bank penalties, the bank may also close your account.

Payday loans can also affect your credit records if you fail to pay the lenders since some banks look for loan history from credit reporting agencies and this could lose you the chance of getting a good loan.

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