What You Need to Know About Payday Loans

You may have heard payday loans are an option for borrowers who want to get money fast and have bad credit. That is true. Although, at the same time, getting a payday loan can be risky and expensive.

Since payday loans are frequently paid off around when you get your next paycheck, they tend to be short term and for small amounts of money. Think a few hundred dollars.

Payday loans usually have a strict, inflexible, and one-size-fits-all payment plan. This can be difficult for some borrowers to repay. Although, there are instances where borrowers can have a longer amount of time to pay back a payday loan. This is referred to as renewing or rolling over your loan.

This can be more trouble than it's worth. While it is nice to have more time to pay off your loan, paying a higher interest for a longer time is not attractive or convenient for borrowers.

Payday Loan Basics

To get a payday loan, you need to provide proof that you are currently employed. This could be shown from pay stubs or bank statements.

So, how do borrowers receive and pay this kind of loan? When you get a payday loan online, you give the lender access to your checking account (or an ACH authorization). The amount of your loan is deposited in your checking account. Then, when payment is due, the lender takes out the money owed from your account.

A best bet is to know the exact date the money will be taken out. On that day, check to make sure only the amount that the lender said they were going to take is gone from your account.

Here are some quick facts about payday loans:

  • Laws governing payday loans vary by state.
  • Some states place restrictions on the loan amount.
  • According to Consumer Finance, the average interest rate is $10-$30 per $100 borrowed.
  • Your income can impact the loan amount you're eligible for.
  • Payday loans involve a lot of risk.

What to Look For in a Payday Loan Lender

There are a variety of lenders out there who offer payday loans. To help identify good lenders, look for the following things.

Clear communication. There are a bunch of companies out there that want to scam you. Don't let them. One tactic some bad lenders use is to make grand promises they don't intend to follow through on. The bottom line is this: if a company rep gives vague or grandiose answers to your questions, or you just feel uncomfortable, don't pursue it further.

Online presence. A reputable payday lender wants to connect with borrowers in need. For that reason, they'll have active social media profiles and an updated website. The Internet is also a smart way to check up on a company. Are there a lot of complaints? Do they do what they say they do?

Licensed. All payday loan companies should be licensed to do business in your state. You can ask the lender to provide this information or contact your state's bank regulator for confirmation.

If you choose to get a payday loan, make sure you completely understand all of the terms of the loan in order to avoid paying hidden fees. For example, there could be hidden fees related to late payments or a check that bounces.

Car Title Loans: An Alternative to Payday Loans

Here at FindTitleLoans.com, we advise borrowers not to get payday loans, and it isn't simply because we're in the business of connecting customers with car title loans. The reason we make the recommendation to avoid a payday loan is because it's a risky and unsecured investment. With these and other similar loans, a borrower does not secure the loan with collateral. When nothing seperates you from your repayment, lenders don't have any guarantee a borrower will pay off their loan, and interest rates skyrocket.

In contrast, auto title loans use a borrower's car title as collateral. This makes the loan secure. Since there is a piece of collateral, lenders are more confident the loan will be paid off in full. With this increased confidence comes lower interest rates. Here's a striking statistic: on average, the interest rates for online car title loans are three times lower than payday loans.

Plus, when you take out a title loan, you're eligible to receive more money than a payday loan. While normally payday loans are a few hundred dollars, you could get a few thousand dollars in a car title loan. What a difference, right?

It All Boils Down to Personalization

One of our favorite things is personalization. After all, we recognize that each borrower is unique and has specific needs. We're able to provide a number of flexible repayment plans for borrowers.

However, there isn't the same opportunity for personalization when it comes to payday loans. They're specifically designed to be short term, and the payment plans tend to be rigid.

The title loans we provide do not box you in like that. In fact, you could have anywhere from a few months to a few years to repay your loan. If your financial situations changes while you're repaying your loan, that is completely okay. We are flexible when it comes to revising payment plans, and there are not any penalties for repaying a loan ahead of schedule.

In the end, we strongly recommend borrowers who need money as soon as possible consider car title loans. They are so much of a better deal than payday loans.

Though, we are aware not every borrower is able to get a title loan, as not every borrower has a car title. If you choose to get a payday loan, choose a reputable lender and be prepared to pay back your loan on time.

Whether you get a title loan or a payday loan or any other type of loan, make it a priority to know all the nitty gritty details about the agreement before you sign. This will help you avoid any nasty surprises in the future and make you a more educated and savvy borrower.

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