Payday Loans How To Choose A Lender

Most of us have experienced a minor crisis which called for immediate cash. If you have been in this position you may have considered taking out a payday loan, also known as a cash advance or paycheck loan. It’s a well known fact that these loans feature steep finance charges, obligating the borrower to repay the debt at an annualized interest rate of over 900%. Because of the high cost of this form of borrowing, payday loans should only be used as a last resort. Using them frequently can trap a person in a dangerous cycle of debt.

If you decide on a cash advance loan you have a number of options. To the dismay of many lawmakers, this form of lending has proliferated throughout the US and Canada, and those who don’t have local access to a lender can easily find one online. In fact, your online payday loan options are so abundant that you may have some difficulty in settling upon a lender. The following are some unique features of payday loans, and a few guidelines to follow when getting one.

Exactly how high are the finance charges? A typical $250 payday loan carries finance charges from about $40 to $75, which translates into an APR of 400% to 800%. Not much of a bargain, but you can find significant differences from lender to lender.

One criteria you can use to compare payday loan companies is the maximum amount they will lend. The minimum amount is normally around $200, with the upper limit being somewhere around $2000. The precise amount will be determined by several factors including your income and work history. In many cases you will be able to increase the maximum amount for which you are eligible by building a history with the lender. Take care not to borrow more than you can afford to repay on the specified date, or you will incur even more finance charges.

How quickly will you receive your money? If you get the cash advance in person at a local establishment, you will have the cash as soon as you are approved. Online lenders take slightly longer, with the next business day being the norm. Some companies offer money wired into your account on the same business day provided you receive approval before a certain time, for instance 2:00 pm. You will probably pay more in fees for same-day service.

The minimum monthly income requirement for a payday loan can be as low as $800, not a big issue for most full time workers. Most lenders will not run a credit check; however, many of them use some type of tracking service that verifies identity and other information given by the loan applicant.

What if you are self employed or living on a fixed income like a pension or social security? Not all lenders will extend credit for this type of income, but you can find one with some persistence. In the event that you receive some non-traditional form of income that you want considered, the lender will verify the income by looking at your bank statements.

Do you happen to have access to a fax machine? With many payday loan companies, you won’t need it. “No Fax” lenders are the norm these days. While some lenders may require you to fax proof of income, most of the time everything can be verified online, saving valuable time in getting your money which can be deposited directly into your checking or savings account.

In the event you cannot pay off the cash advance on your next payday, most lenders will allow you to roll over the balance several times. Beware of doing this at all costs, as the already expensive finance charges can multiply quickly and make the loan even more difficult to repay.

Despite opposition from a number of lawmakers, the payday loan industry is booming. These “lenders of last resort” provide a needed service for a growing segment of the population- low to middle income workers who have difficulty obtaining more traditional loans because of their credit history and income level. Before you choose a payday loan, investigate any and all other sources of funding available. Choose a lender that has been in business for at least several years and is up front about all of their fees and policies. Don’t make a practice of using the loans regularly, and try to avoid extending loans beyond the initial repayment period. Finally, work to improve your credit score so that if financial difficulties arise in the future you will have a less expensive way to deal with them.

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