You've finally decided that you need financial help and have decided to seek assistance through a payday loan. Stop! Before you do anything talk to friends and family about your situation to ensure this is really the right move for you.
If after seeking help you feel that you understand the risks and benefits of your decision make sure you find out about these five things before getting a payday loan.
Ask about the Interest Rate
This might seem like a no-brainer, but understand that when you get a payday loan the interest rate is considerably higher than the standard interest rates on home mortgages or credit cards. In fact a recent news item had a House subcommittee looking at the possibility of placing a cap on the interest rates of payday loans at 391 percent. (The Consumerist, "House Preparing to Legalize Payday Loans with 391% APR," April 2009) That's well above the five to seven percent for a home loan and the 13 to 16 percent for most credit cards.
Review the Terms of the Agreement
This is a very important part of the process because once you see what you are agreeing to you just might have second thoughts.
The "terms of agreement" is your contract which identifies you as the borrower along with the loan amount and the repayment schedule. The problem is that the interest on most payday loans, if annualized, is well over 300 percent. Know what you are getting yourself into before you need payday loan help.Find Out the Consequences of Default
If you are not able to repay your pdl loan by your next paycheck, you will be considered in default. When you default on your payday loan several things will happen.
First, along with the original interest on the loan (generally $15 to $30 per $100), you will now owe a large default fee plus a bounced check or bounced automatic transfer fee. Next, you may be subject to additional fees or even a higher interest rate. And finally, your credit will now be jeopardy.
Before you decide that not repaying the loan is the right move, be sure to investigate your options and get payday loan help.
Consider Alternatives and Options
You're in a tough financial situation. You're thinking you might apply for a cash advance loan. Before you do, consider where else you may be able to get financial help. Dipping into a rainy-day savings account, asking friends and family, finding out if your employer can provide a payday advance, or even using a lower interest rate credit card might just be a better option.
Know Where to Get Help if You Get Stuck
When everything is said and done, if you're only option is to go ahead with a pay advance loan, know that there is help available should there come a time that you need it. Don't let one payday loan spiral into a payday nightmare which requires you to get loan after loan after loan to cover your debt.
Stop Payday Loan Insanity - Five Things You Need to Know Before Getting a Payday Loan