What You Need to Know About Online Payday Loans
If you sometimes find it hard to make ends meet, you’re not alone. If you’re facing an unexpected expense and don’t have the cash, and you also don’t have enough credit for a credit card or a personal loan, you may be tempted to seek an online payday loan. While this type of loan can get you through an immediate crisis, it can also cause bigger financial problems in the long run. Here’s what you need to know about online payday loans.
What is a Payday Loan?
A payday loan is a short-term unsecured loan that has to be paid back by your next paycheck. Instead of making monthly payments as you would with a traditional loan, you owe the full amount along with interest and fees two weeks or less after you borrow funds. The interest rates charged on these loans are very high, sometimes triple digits. Because of the high-interest rates and added fees, you may find it hard to repay when it’s due.
Where Payday Loans are Offered
Payday loans are available both online and in person. The requirements for approval are usually not strict and some companies don’t even run a credit check. They may require proof of income and the date of your next payday. Those who end up using payday loans typically have poor credit and minimal income. Online payday loans should be a last resort and only be used for a true emergency
Paying Back a Payday Loan
The loan is due in full the next time you get paid. With an online payday lender, payment will probably be made using a direct debit from your checking account. If you don’t have the funds to pay it back, you’re likely to end up with fees from your bank on top of the interest and fees already being charged on the payday loan. The payday lender may offer you a rollover if you’re unable to pay back the loan. This means you pay the interest and fees and borrow the money again, creating a cycle that is difficult to get out of.
Alternatives to Payday Loans
Because of the high cost of payday loans, it’s important to consider all of your options before deciding to take one out. There are some lenders who specialize in bad credit personal loans, and even though the interest rate will be high, it’s much lower than the cost of a payday loan. If there’s any chance you could borrow from family or friends, that’s a much better option than a payday loan.
Taking Care of Your Credit
Credit loans aren’t usually reported to the credit bureau, but if you default, a collections account can seriously damage your credit. Build or rebuild your credit with a bad credit loan or credit card. As your credit improves, you put yourself in a better position to be able to borrow money when needed.
Being proactive about your credit also involves making sure what’s showing on your credit report is accurate. Dovly is an automated credit reporting engine that can help with any errors you find. Try it risk-free with our free membership tier. Contact Dovly today.