Online payday loan lenders can be found all over the Internet. You will find many lending companies claiming that these types of loans are perfect when you need instant cash for just about anything, including a car repair. Payday loan lenders advertise that they are your best option in your times of financial need when the truth is that you do have a lot of options and getting a payday loan is just one of them. Before you go on believing the advertisements, here are some things you need to know about online payday loans and why you should avoid getting this type of loan when dealing with major expenses such as a major car repair.
A direct payday loan is an unsecured loan and as such does not require the borrower to put up something as collateral. It is called a “payday” loan because it is usually made payable on the borrower’s next payday. However, most payday loan lenders require that the borrower is currently employed in order to be able to qualify for the loan.
The nice thing about online payday loans is that the borrower can have easy access to money when they need it badly for whatever expense they need. The downside about this type of loan however is that the interest rate they charge can be very high considering that the lender takes on a huge risk in lending money to a borrower without collateral. When you are faced with a major car repair and you are thinking of getting an online payday loan to cover expenses you have to consider the high interest rate and most importantly, whether you will be able to repay the loan when it falls due. If you are positive that you can repay the loan once you get your next paycheck then go ahead and apply for a loan now. However, if you know that your paycheck is enough to cover for your other expenses such as your rent, electric bills, phone bills, food and your gas bills then you might want to consider other options.
When you fail to pay your loan on the date when it is supposed to fall due, you will be forced to make an arrangement with the lender for an extension of the period for your loan or you could borrow money from others so that you can pay your loan from your payday loan lender online. This is the beginning of the vicious cycle of borrowing money which will never end until you are able to come up with enough money to pay off your debts. If you opt for an extension the lender will understandably charge you with an increased processing fee and interest rate.
Furthermore, when you take out a payday loan there are a lot of charges that you could end up paying when you will be unable to pay the loan on time. These charges can come in the form of bank fees when the lender cashes in your check or processes a debit only to find out that there are no sufficient funds in your account. The lender can also charge you additional fees when this happen. So you see, aside from the principal amount of the loan, the processing fee as well as the interest rate that you are supposed to pay when the loan falls due, there could be other fees that you need to pay when you fail to pay the loan on time and this is the danger of getting a payday loan when you are dealing with a major car repair or other unexpected expenses that you may have.