By: Yara Zakharia, Esq.
Payday loan borrowing is one of the most effective, time-saving, convenient, and hassle-free ways to get cash instantly. However, with interest rates reaching as high as 650%, payday cash advance loans are also one of the surefire ways for consumers to plunge into the abyss of debt.
The following tips will provide guidance to consumers on smart payday loan borrowing:
1. Pay the cash advance loan on time: Borrowers who are unable to pay off the payday loan on the specified date, defer or roll over their payments. By extending the term of their payday loans, they end up accumulating high finance charges, interest and penalties.
2. Utilize payday loan borrowing as a last resort: Borrowers should avoid using payday loans as a regular quick fix.
3. Borrow a minimal amount that you can afford to repay in its entirety by the next payday.
4. Avoid businesses that encourage roll-over payday loan borrowing.
5. Read the fine print before finalizing any cash advance loan: Consumers should read and make sure they understand thoroughly the fine print in an emergency payday loan contract to determine the fees (application and wire fees, for instance), charges, interest fees, and terms. They should look out for signs of predatory lending and not hesitate to ask the lender to provide company information.
6. Evaluate income and expenses: To ensure constructive payday loan borrowing, consumers should look for ways to increase their income and/or reduce their expenses. This can be achieved by developing a savings plan, budgeting as well as tracking expenses, and finding ways to save.
7. Cash out the spending money: Smart borrowing can also be effectuated by paying in cash for discretionary expenses such as shopping, entertainment, and dining.
8. Compare payday loans offered by different lenders.
9. Avoid an emergency payday loan that asks for an advanced fee before even obtaining the loan.
10. Shop around for the cash advance loan with the lowest annual percentage rate (APR): Another recommended payday borrowing tactic is to research payday loans offering the lowest APR. A lower interest rate is beneficial in cases of loan extension and lightens the financial burden upon repayment of the emergency payday loan.
11. Ensure that there are sufficient funds in the savings account: A borrower's savings account could serve as a buffer for unexpected expenses.
12. Find a trustworthy lender: Proper payday loan borrowing also involves verifying the lender's credibility and background in order to ensure that the consumer is not dealing with a scam company. This can be done by consulting the Better Business Bureau or the Chamber of Commerce where the lender is affiliated. An online investigation, though time-consuming, can also be conducted. The importance of payday loan borrowing from a trustworthy institution that assures the confidentiality of the client's transaction and personal information cannot be over-emphasized.
13. Consider an overdraft protection offered by banks: An overdraft protection protects a borrower's account from incurring charges when he or she has insufficient funds.
14. Beware of costly payday loans and offers that seem too good to be true
In summary, before resorting to personal loans, consumers should shop around thoroughly and implement the smart borrowing tips outlined above. This will prevent Americans that are struggling to make ends meet from being trapped further into debt and will save them a lot of money, worry, aggravation, and stress.
