A payday loan is a small, short-term loan that is typically due on your next payday. Before taking out an online payday loan, there are several things that you should consider to make an informed decision.
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Consider the Cost of the Payday Loan
Payday loans often come with high interest rates, fees, and penalties. The average APR for payday loans is 400%, while the APR for credit cards is between 12 percent to about 30 percent according to Consumer Financial Protection Bureau. Make sure that you can afford the loan’s cost and that you understand the fees that are involved. Keep in mind that if you are unable to repay the loan on time, you’ll incur additional fees and interest charges.
Consider Your Ability to Repay the Payday Loan
Before taking out a payday loan, assess whether you will be able to repay it on time. If you don’t have the funds to repay the loan, you may be tempted to roll it over, which will incur additional fees and interest charges according to Consumer Financial Protection Bureau. Carefully evaluate your finances and ensure that you have a solid plan for repaying the loan.
Consider Other Options then Payday loans
While payday loans may seem like a quick and easy solution, there are often better alternatives available, such as borrowing from family or friends, taking out a personal loan from a credit union, or negotiating a payment plan with your creditors according to Consumer Financial Protection Bureau. Consider all of your options before deciding to take out a payday loan.
Consider the Payday Lender
Before applying for a payday loan, research the lender to ensure that they are reputable and legitimate. Check if the lender is licensed in your state and check their contact information. Also, consider if the lender is an actual lender or a lead generator.
Many websites that advertise payday loans are not actual lenders, but instead, they are lead generators who collect your information and sell them to other lenders. It can be hard to identify if a website is an actual lender or a lead generator. To avoid this, ensure that the lender’s contact information is available on the website. In addition, a licensed lender is often accountable to state regulators, which implies that you may have more consumer protection if the lender is licensed in your state.
Consider Your Privacy
When applying for a payday loan online, your sensitive personal and financial information is at risk. Make sure the lender or website will protect your personal information and if there are any policies in place to restrict the site from selling your information. Always be cautious of sites that claim to offer payday loans without a credit check.
Consider Your State’s Regulations
Payday loan regulations vary by state. Some states have strict regulations on payday loans to protect consumers, but others have little or no regulation. Check your state’s regulations to determine if the lender is licensed and if they follow state regulations.
Consider Your Recourse
If you cannot repay the loan on time, what are your options? Ask the lender about their policies when it comes to late payments and defaults.
Also, know your rights and where to submit a complaint if needed. You can submit a complaint about payday loans with the CFPB online or by calling (855) 411-2372.
In conclusion, payday loans are a potential solution to your financial problems. However, they should be considered carefully. Consider the cost, your ability to repay, other options, the lender, your privacy, state regulations, and your recourse when considering an online payday loan.
