If you live in the United States, there’s a good chance that you’ve heard of best payday loans I use. But what are they? Are they really as scary as some make them out to be? And is it true that these short-term loans can lead to financial ruin? We’ll answer those questions and more in this article.
What Is a Payday Loan?
The first thing to understand about payday loans is that they’re not just for people who have bad credit or low incomes; anyone with an active checking account can qualify for one. A payday loan is a small (generally $100 – $500) advance on your next paycheck. Typically, you borrow the money from a bank or other lending institution, and pay it back over two weeks. If you need the money immediately, you have to pay interest (usually around 15 percent), which will be added to what you owe. The lender then takes the full amount plus fees when you get paid again.
You may also see the best payday loans I use referred to as “rollover” loans, because each time you take out a new one, you roll over the old one into the new loan. It sounds complicated, but it’s very simple once you break it down. Here’s how it works:
You sign up for a payday loan. This isn’t exactly like applying for a mortgage at a bank. Instead, you go to a storefront location where someone tells you exactly how much you’ll need and what terms you can expect if you want to borrow the money.
You give the lender access to your bank accounts. Once you’ve signed up for the loan, you must give your bank account information to the lender so they know where to send your repayments.
They send it! As soon as you get your payday loan check, you deposit it into your bank account and then write a check to the payday lender. In exchange for giving your bank account information, lenders often charge higher fees than banks do.
Repeat step 3 until you pay off the loan. Every month, you’ll make a payment to the lender and deposit the loan payment directly into your bank account.
So, does having a payday loan put you in danger of going bankrupt? That’s a big question, but we’ll look at the facts behind it in the next section.
Is Payday Lending Really Bad for Your Finances?
First, let’s talk about the idea that payday loans are extremely dangerous to your finances. It doesn’t matter whether you’re borrowing $500 or $5,000; if you don’t pay it back on time, it can become a huge burden. So, why are payday loans such a bad idea?
Here are a few reasons:
- Payday loans are expensive. For every dollar borrowed, you’ll likely have to pay at least $2.50 in fees, making them the most expensive kinds of loans available. Banks offer lower interest rates, but even the best ones will still cost you about 20 cents per dollar.
- Payday loans aren’t designed to help you build long-term wealth. When you apply for a payday loan, you’re basically gambling that you’ll earn enough money to pay it back before your next paycheck arrives. It might work out for you, but it could also end up costing you thousands of dollars over the course of your life.
- Payday loans are easy to get. The worst part of getting any kind of loan is that it’s easy to get, and it’s hard to refuse. With a payday loan, you simply walk into a store and fill out a form. There’s no paperwork involved, and no proof required to show that you can afford to pay it back.
- Payday loans leave you vulnerable to identity theft. Some states require you to disclose your social security number in order to open an account, which makes it easier for criminals to steal your identity and file fraudulent documents in your name.
While it’s true that payday loans can turn into something much worse than they appear, they’re not inherently evil. You shouldn’t feel bad about taking advantage of them if you think you absolutely need the money.
However, payday loans come with some risks, and you should weigh them carefully before deciding whether or not you want to borrow. If you decide that you do, keep reading for more details.
How Much Can You Borrow?
In general, you can borrow anywhere from $200 to $1000, although the typical average is closer to $500. However, keep in mind that the actual limit varies based on your state, and you might need to ask for a larger loan if you live in a place where the maximum is lower.
Your income also matters. Generally, lenders won’t approve loans to people earning less than $250 per week. This is especially important if you plan to use your payday loan to pay off a car loan or medical bill.
There are also limits on how many times you can use payday loans in a year. These vary by state, but generally speaking, you can only borrow them three times. After that, you have to wait six months before applying for another payday loan.
Do You Have to Sign a Contract?
Like all loans, payday loans involve a contract between you and the lender. Most of the time, this is nothing more than a standard agreement that spells out everything you can expect and agree to.
- It will specify how much you have to pay in interest, fees, and principal
- It will explain how much you have to pay back each month
- It will include a clause stating that you can’t change your mind after signing
- It will outline conditions under which the loan can be canceled, including late payments
But sometimes, payday lenders will try to hide the terms of their agreements. For example, they might insist that you sign the contract while sitting in a chair with your hands tied behind your back. Don’t fall for it!
If you’re worried that the contract might contain hidden clauses that you didn’t read, don’t worry. Just call the company and tell them you’d like to review it in person. If they refuse, move on to another provider.
Are Payday Loans Legal?
No, they’re not legal. Although federal law prohibits most payday loans, individual states allow them, and some even restrict the types of lenders who can provide them.
Even though the laws vary by state, you’ll likely find that payday lenders can’t legally operate in your area. They have to follow the same rules as regular banks or credit unions, but they typically avoid doing business in communities where they could run afoul of local regulations.
This means that you can’t always count on payday loans being available near you. So, if you absolutely need cash right away, it might be worth looking for a nearby alternative.
Is It Safe to Get a Payday Loan Online?
Although payday lenders can’t operate everywhere, you can still get a loan online. Some companies offer loans without ever meeting you in person, so you never have to leave home.
These websites usually ask for a lot of personal information, including your name, address, phone number, and date of birth. They also request that you submit a copy of your driver’s license. Finally, they often require that you complete a lengthy application process before they’ll approve your loan.
Many experts believe that getting a payday loan online is safer than getting one in a storefront location. This is largely due to the fact that online transactions tend to be processed faster and cheaper than in-person transactions, and because the website has less opportunity to scam borrowers.
Still, not everyone agrees. Some experts argue that you’ll still be putting yourself at risk by getting a payday loan online, since you don’t know the company that you’re dealing with. Others say that the internet provides greater protections against fraud.
Regardless of how safe you think it is, you’ll probably save a lot of money by avoiding in-store payday loans. Even if you choose to apply online instead, you can still get a better deal by shopping around.
You must understand that payday loans are good to have but you have to pay interests higher than that of many other types of loans. You can sign up by applying for mortgage at bank after that give lenders access to your bank then the process starts you have to pay interests every month for the loan you have been given.