Stores touting cash advance loans are on the rise.
Perhaps you have a co-worker or neighbor who has mentioned in passing how they have used payday loans.
You may have even seen a store in your neighborhood and are curious about how this type of loan works.
Wonderment and apprehension are two easy reactions when the subject of payday loans is brought up during a conversation.
There are plenty of horror stories available from people who were wronged (or just felt wronged) by the cash advance lender. But the harsh reality is that some people who signed their contract agreements were in a desperate place, with little hope of paying back their loans on time.
They signed with the hope that things would somehow turn around for them monetary before the loan payback agreement was up.
You do not have to be a victim of shady operators. There are steps you can take to protect your financial situation from getting worse because of a loan gone wrong.
Keep reading for a sensible approach:
Your first step to not getting scammed by predatory lenders is to understand how they work. This type of loan is usually thought of as a last resort loan. It can be a viable solution for getting out of a short-term financial rut. However, you should know that you will be essentially writing a personal check to the lender for the amount borrowed plus finance charges. In exchange, you get that fast money you need (which is the amount on the check minus the finance charges).
It is crucial that you pay back the loan on time (as per the contract agreement). Paying back the loan earlier than the payback day is the best scenario because less will be owed in finance fees. If you are unable to pay back the loan on time, then expect to owe more fees on top of the ones from the original loan period. This is why payday loans are seen as a last resort. All these finance charges and late fees add up to quick debt, making a once reasonable loan feel like climbing Mount Everest (without a safety harness!).
Do payday loans sound scary? Sometimes they do.
And this is a normal reaction, especially when it comes to the already scary world of finances and paying back debt.
The good news is that cash advance loans can work out just fine for those in need of fast debt relief. Here are some more safety tips for taking out this type of loan:
- Visit more than one loan office or website. Some lenders charge higher fees than other lenders, so it pays to shop around before settling into a contract agreement. If the fees seem outrageous, they probably are and you’re better off going elsewhere for a loan.
- Borrow only the amount of money you really need. Repeat after me: payday loans are as forgiving as borrowing from your Aunt Suzy. If paying back the loan on time doesn’t go as planned, then at least the finance charges and fees won’t be higher than absolutely necessary.
- Are you ready to sign on the dotted line? Not so fast. Make sure your lender has written what the finance charge costs are somewhere on the contract agreement. A transparent loan agreement will save you from any headaches later on.