What are the risks involved with payday loans

Taking up a payday loan is simple; it is like asking for normal loans but with different terms. With a payday loan, you get the money almost instantly and the interest rates are imposed immediately you receive the money.  This type of loan is fast, convenient and requires minimal qualification. A payday loan may be one of your best options during a financial emergency, but has a high chance of creating a future financial crisis. Before you take up this loan, you should have a look at the following risks involved;

Taking loans to pay for other loans

Conventional loans may be harder to obtain; they take longer and require more qualifications. Payday loans are instant, easy and convenient to apply, and will require minimal qualifications.  When people have impending loans from credit cards, insurance policy loans, bank loan payment and pawn brokers, they are more likely to take up loans to take care of these loans. Since a payday loan is easy to obtain, you will find yourself taking up the loan to settle other loans.

The risk of a debt cycle

When you are fond of paying your loans using other loans, you risk creating a debt cycle. This cycle will automatically get you deeper into debts. This means you will not meet most of your loan deadlines and may use most of your income to settle some of your debts. This financial crisis may be difficult to come out of.

The risk of being scammed

When you register to a payday website, there is a high chance you may be providing your information to fraudulent lenders and scammers. Online businesses are known to have the highest number of scammers. People have created websites which they use to scam unsuspecting people. They collect your information and it for subscriptions and identity theft. Some scammers pose as your payday loan lenders and call may call you to demand for payments. Fraudulent lenders have unlicensed payday websites where they impose excessive interest rates on loan borrowers. You should think twice and investigate before feeding your information to online webs.

The risks involved in taking these loans are enough to cripple your financial health. For starters, the interest rates on payday loans are too high, especially for a short-term loan. Conventional loans are long term but they have cheaper interest rates. The interest rates on payday loans are imposed as soon as you get the loan. When you don’t pay the loan on time, interest rates will increase until you pay it fully.

When you don’t pay your loan on time, you risk your credit card report. Payday loans do not reflect directly on your credit card so how is this possible?  If you don’t pay your loans on time, your debt will appear on your bank statement and the lender may report this to the credit bureau depending on their terms.  Either way, the unpaid loans will appear on your credit card report as bad credit. With bad credits, it will be hard for you to receive traditional loans.  Insurance companies will charge you more and you may get less job opportunities if you have bad credit reports. The risks surrounding a payday loan are high, always avoid payday loan if you are not in any financial emergency.  If you take the loan, take measures to avoid the repercussions.

The dos and don’ts of payday loans

Payday loans come in handy during financial emergencies. They are also a good option when you can’t get a loan from any other lender.  The best thing about payday loan is that it is convenient and fast. You won’t have to go through a long screening and application process. You can qualify for this kind of loan with no need for collateral, a job or a good credit score. The money is deposited into your account within minutes or hours.

Here is what you should do when taking a payday loan

Create a plan

Like any another loan, you need to create a budget or plan before taking up the loan. Create a plan of what you need and exactly how much you need to avoid taking a higher or lower rate. You will also need to balance your finance and ensure you can pay back the loan on time. A budget is very helpful in planning your spending and repayment. It will also help you take up what you only need.  This will make it easier to pay back the loan and the interest rate.

Clear the loan on time

Paying your payday loan late may have its consequences. If you are late on the payments, the lender will automatically impose growing interest rates. They will continue to grow until you clear your loan payments. The interest rates of an unpaid loan are higher than the normal interest rates imposed, meaning you will have a difficult time clearing the payments.

Late payments will also affect your credit score negatively. They will appear on your credit history as negatives, making you lose your credit points. If you keep this up, you will have a difficult time trying to get conventional loans from lenders.

Understand the terms and conditions

Lenders tend to change the terms and conditions of their site every now and then. Before you take up a payday loan, you should always check up on the terms to ensure they meet your needs. Some lenders impose some additional payments and penalties which may cost you much more than you budget for.

What you should not do

Taking more money than you need

You should never take up payday loans for needs that are not financial emergencies. Using payday loans for leisure activities may pose a great danger to your income and financial stability. Remember that you will have to pay the loan back with interest and you may struggle to make the payments back on time. Never include leisure in your payday loan plan.

Using it to pay back other loans

People make bad financial decisions of paying back credit loans using payday loans. This tends to create a debt cycle which can be hard to come out of. The debt cycle is vicious and never ending , it will pose a great risk to your financial stability. You may lose most of your credit points and value items in the long run.

Final word

You should always follow these guidelines for a smooth payday loan process. Paying your loan back can be difficult when you do not have the necessary information to guide you.

Payday loans VS personal loans – a unique comparison

When you need money for a financial emergency, you can always ask for a loan form a lender. They type of loan you get will depend on the degree of the emergency. Immediate financial aid will need immediate funding, and that is when you turn to payday loan lenders.  Payday loans are good when you are facing a minor accident, lack of utilities or need to pay a bill immediately among other reasons. Personal loans on the other hand are good for business emergencies, impending bills and future financial crisis.

Let’s look at the basics; payday loans

They are short term loans meant for short term emergencies. These loans are to be paid back within two week and three months depending on the terms of the lender. The payment method fully depends on you, as long as you clear the loan before the agreed upon deadline.

They have been proven to be convenient for financial emergencies.  A payday loan application and request can take up to a few minutes or hours.  All you need to qualify for this type of loan is an identification card and a bank account; in some cases lenders may ask for a proof of income.

The interest rates on this type of loan are higher compared to conventional loans.  The lenders impose the rates as soon as you receive your payday loans. This means it is calculated and the deadline is given immediately you receive this loan.

A poor credit record does not hinder you from accessing a payday loan. Lenders will approve the loan request regardless. A late payment however, will appear as a negative on your credit report thus messing up your chances of getting conventional bank loans

Persona loans

Personal loans are to be paid over a couple of years as per an agreement with you and the lender. The numbers of years you make the payments depend on the amount of money you received from the lender. The payment plans include monthly, yearly and quarterly payments.  Some lenders may deduct the payments from your income even before you have full access to it

You are free to use this loan according to your wishes. It can be god for both business investments and personal needs. Personal loans have a strict requirement and qualification. you will need to submit your identification card, proof of permanent income, employer’s contacts, your credit report and some form of collateral for screening. It can take a lender a few weeks to approve your loan request.

A poor credit report may cost you the personal loan. With impending loans, poor credit history and low credit points, most lenders will not trust you to make the loan payments on time. if the lender happens to approve the loan, it will be a lower amount than you will have signed up for.

There are two easy you clear our personal loan; sign up for a fixed rate payment or a variable rate payments plan. Fixed rates make monthly repayments easier for the first few years.

The final word

You should take up the loan depending on your needs and the immediate financial situation. Ensure you take up only what you need to make the repayment process easier. �7p�����3!

Payday loans VS credit cards

There has always been a long debate on whether payday loans are better than credit cards. Most people are more inclined to taking up payday loans because they are more convenient and easy to obtain. There are many risks involved with both payday loans and credit cards. They are both convenient for emergency situations and quick financial fixes. People have always been debating on which loan option is better than the other, here are some comparisons to help you determine the best option

The access of the loan

When you have a credit card, you can simply access it by using it to pay for your everyday bills. If you do not have a working credit card, you can apply for one in a credit card company. It may take around two weeks to get a fully recharged credit card that is ready to use. For modern banks, credit cards will take a few hours.

Accessing a payday loan is easier. All you need is a national identification card or driving license to prove you are a citizen and an active bank account where lenders can deposit the money.

How much do you get and how do you pay it back?

When you borrow form credit cards, you receive a large sum of money but the lender does not expect you to make the payments immediately. They create a payment plan where you make the payments after a period of time. You can use this time to save up money for your income and make the payments faster.  Their payment methods include yearly, monthly and quarterly payments.

For most payday lenders, the government has a minimum and maximum limit set up. The amount of money you receive will depend on the terms of the lender.  The payment period can be between two weeks and three months depending on the lender.

How you use the funds

You can access a credit card for quite a long time. Most lenders have terms that allow you to use it for around one to three years. Around that period, you won’t have to pay for another credit card when you are in need of the money. Credit cards can be helpful when you have financial emergencies like bills.

When you want a payday loans, you will have to apply and wait for the approval. This happens every time you need the loan and you have repaid back the previous payday loan from the lender. You are free to use the money as you wish once it is deposited in your bank account. The repayment is fast depending on the terms of the lender

The interest rates

The interest rates on a credit card are added to your account periodically. The rates are added to the payment balance so that you can clear a portion of the loan and interest rates every time you make some payments.

The interest rates on a payday loan accumulate immediately the money is deposited into your account by the lender. You have to make the full payments of the loan and interest rates before the deadline.

Important things to consider when applying for a payday loan

Many people prefer payday loans because they are quick and easy to access.  When you have a financial emergency, they can come in handy but just like any other loans; they have their ups and downs. You should understand all the terms of a payday loan before applying for one. it is also important to have all the information on the loans and the lenders to prevent any future financial issues.

Here are some important issues to consider before taking up a payday loan

What is the purpose of applying for the loan?

Payday loans were created for people with financial emergencies but anyone can access the services. If you are applying for the loan, you should question your needs first.  If you are not facing a short term financial crisis, do you really need the money? Leisure activities are not worth the loan because they will hurt your paycheck or finances in the near future. Good reasons for taking up the loan include impending pills, unexpected job loss, and some minor accidents.

How much do you need?

If your reasons for taking up the loans are good enough, you should calculate how much you will need before taking up a loan. The loan limit of a payday loan may be set higher, but you should only take up what you need. Borrowing the exact money you require can save you from future financial crisis. Avoid any temptations to take up more money for other finances or non-emergency situations. Remember, payday loans are expensive and can e difficult to pay back.

What are the payment options?

Many people fail to understand the payment options before they apply for payday loans. Different lenders have different payment options. Application and approval for a loan may be easy, but paying back the loan will prove to be difficult. The interest rates of the loan accumulate immediately you receive the loan from the lender. Some lenders impose a weekly payment option while others want their money repaid monthly. Learning about the payment is important to help you pick the most convenient option.

The terms and conditions of the lender

Always remember to read the terms and conditions of any loans before application. Some lenders indicate rules that may cause future financial misunderstandings. Lenders may include some hidden fees or additional costs in their terms that you may be unaware of. Lenders may change the terms and conditions regularly, so ensure you check the every time you want to apply for a new loan

Know the risks involved with payday loans

Because the application and approval is quick and easy, many people forget to check on the repayment and risks. The interest rate on a payday loan is high, which makes it difficult when you are repaying the loan. If you do not make the payments on time, it will reflect as a negative on your credit card report which will limit your ability to borrow conventional loans.

Final word

Always remember to check the website for a license and security certificates to avoid borrowing from scammers. Be careful of people posing as payday loan lenders online as they aim to scam you out of your money.