Majority of payday lenders are upfront with the terms and conditions of their lending policies. The problem is that some people don’t understand the whole concept of payday loans. You may have heard a lot of good and bad things (the latter prevailing of course) about payday loans and payday lenders, and most of them are true. Here are the basic principles that you should have in mind when borrowing from a payday lender.
Payday lenders are in business of making money off people like you. They lend you a cash advance because they hope to make a profit. If they see no potential in making money, they reject your application.
How much money do they make?
The usual fee is about 30% of what you borrow. In hard numbers it looks like this
|Type of loan||Amount||Month||Total repayment||APR||Actual interest|
When you look at this table, you see that if you borrow $500 for a month (with APR of 1737%), you actually pay less than if you took out an installment loan for the same amount and a much lower APR (19.9%).
The problem with payday loans is not the high APR (annual percentage rate) but the fact that you have to repay the loan within a month at the latest. This is the basic mechanism of payday loans. The APR doesn’t really matter, but what matters is the fee that a lender charges.
If you need a payday loan, you need to remember the following:
- This type of loan is meant for a short period of time. Don’t seek payday loans with monthly payments, because they will significantly increase the cost of a loan.
- Always pay back the loan on time. Most payday lenders are known for their aggressive debt collection practices. This is caused by the fact that about 15% of loans are never paid back, which results in huge losses. Payday lenders may have no choice but to go after defaulters. This gives them a bad wrap but most businesses would do exactly the same thing.
- If you can’t make a payment, call the lender and ask for extension. Majority of lenders have no problem with that. This will cost you an additional fee, but no collection agencies will ever call.
You can apply for a payday loan online
This website provides access to a large network of direct payday lenders in the USA, UK and Canada. You can apply for a payday loan with a number of honest payday loan lenders (if that’s not a misnomer) using this website. If your application is approved by one of the lenders, the lender is obligated by law to inform you about the terms and conditions of your loan. You have the right to reject the offer with no consequences. You can also haggle for a lower fee. If you don’t like what the lender is offering, don’t accept it.