Payday loans have received a lot of bad press in recent years. Much of this criticism has been extremely unfair because the concept of a payday loan is entirely sound. There is space in the market for a loan with high-interest rates that do not require any form of collateral or any credit check.
In a world where electronic credit scores seem to have taken over, borrowers are finding the loan application process increasingly impersonal. In many ways, lenders are no longer taking into account the human behind the application. And that has opened the door for payday loans.
What Can You Use them For?
It is important to define how payday loans should be used because there are so many people not using them correctly. And that is when people begin to run into difficulties. For a start, the high interest rates that many people have criticised payday loans for never kick in unless you miss a repayment. If you make all your repayments, you will never have to worry.
Payday loans should never be used to facilitate major purchases due to the quick turnaround of these loans. Understand that loans like this are designed to last no more than a few days to a few weeks. They are designed in this way, so if you are unable to get the money back in a short space of time, this is not the loan for you.
But as for their use they can be used for practically anything. They are mainly used by those who need money fast, to cover home emergencies. For example, if the washing machine has broken and you do not get paid for another week a payday loan would help you there.
You would then immediately pay back the loan when you receive your wages for that month. This is where the name is derived from.
All in the Comparison
The unfortunate downside of payday loans is that you are never going to find an extremely low interest rate. In this case, low rates are entirely relative. More traditional lenders are always going to beat out payday loan lenders, but that is the price you are going to pay for a loan with such low requirements for entry.
The only way you are going to get a low rate is through comparison shopping. Thankfully, there are so many payday loan lenders that finding a great rate is easier than you think. All you have to do is be willing to shop around.
A Note on Lenders
The ease of setting up one of these businesses and the lack of regulation has allowed bad lenders into this market niche. Before you borrow from anyone, make sure that you have performed due diligence on the lender. See what others are saying about them online and inspect their previous record.
If a lender has only been in business for three months, it may be worth looking elsewhere. The safety of your money is worth far more than a slightly better interest rate.
How to Perform a Payday Loan Comparison Shop
To begin with, most payday lenders operate online, as opposed to via physical stores. Many prominent payday loan lenders have stopped operating from physical stores entirely. This makes it easy for you because you never have to leave the comfort of your sofa.
Start by performing a simple search for payday loan lenders. You should find some sites dedicated to comparing them. On these sites, you can easily compare various lenders based on the criteria that matter most to you. For example, you can only compare payday loan lenders that are willing to lend more than a specific amount.
Understand that these sites are not necessarily completely relevant. Some of the offers and some of the criteria may well be dated. Visit your preferred payday loan lender and see if the offer is still valid.
Calculating How Much You Can Pay
An essential final step before applying for any payday loan is to calculate how much you can expect to pay. Most lenders will have loan calculators on their websites. You just have to enter the amount you are borrowing, the length of the loan, and the interest rate.
Press the button and it will tell you exactly how much you will have to pay back. Figure out whether you can actually make those repayments before committing to anything first.
Using Payday Loans Right
Once again, you must use payday loans right if you want to avoid getting burned. These are extremely short-term loans, and if you are unable to pay them back quickly, you are going to run into trouble. These lenders are notorious for hunting people down when they fail to repay.
But if you have performed adequate checks before accepting any offer of a loan you should already know that you are capable of making the repayments.
Have you had any previous experience with payday loans?