How to Have the Best Payday Loan Experience

How Can You Have The Best Payday Loan Experience? When you find yourself in a financial crunch, a payday loan can be a very useful tool to help you get through a tough time. However, a person needs to be cautious to avoid some of the pitfalls that can come with using an online payday loan. With so many lenders and options out there, it’s hard to know where to begin and how to get the best payday loan from a reputable lender, and avoid scammers and loan sharks. By using these simple tips, you can avoid the biggest mistakes that consumers sometimes make.

1. Beware of unsecured sites and “phishing”.

When looking at payday loan and cash advance lenders online, only apply and enter your personal information on sites that use a secure (https://) form. The "http" in a web address stands for “hypertext transfer protocol”, which is the foundation of data communication on the internet. The “s” that you sometimes see at the end of the "http" stands for "secure". A website can only have the (https://) designation if it has been verified as secure- making it an important thing to look for.

Also, look on the website for the use of a security seal. McAfee, Symantec/Norton/VeriSign, or one of the other reputable companies, will allow their users to place a seal directly on their websites. You should be able to click on the seal and see the site’s credentials.

2. Watch out for up-front fees.

Reputable lenders don’t charge an application fee or any other up-front fee to get a payday loan. If a site or lender asks you for money to be approved, it’s likely a scam. You would be wise to close out of that site and look elsewhere.

3. Borrow only what you really need, and what you can afford to repay on time.

This should be a no-brainer, but sometimes people get carried away with any kind of credit. It can be tempting to take a loan for $800 because it’s offered to you, when you really only need $300 to get by. However, the more money you borrow, the more you have to pay back. Plus, there are the finance charges.

Let’s say that your lender is charging $10 per $100 borrowed. If you borrow $800 for two weeks, when you really only need $300 to keep your finances afloat, you just cost yourself an extra $50 in finance charges. Wouldn’t that $50 do more good in your pocket? If you borrow more than you can realistically pay back in the time allowed, you also run the risk of incurring late fees, which will just put you further behind.

Look carefully at your upcoming bills and expenses, and your projected income. Make sure that you will be able to afford to make your payment(s) in full on the due date(s) without causing yourself a shortfall.

You also need to make sure that you have the money to repay the loan available in your account on the due date to avoid late fees and insufficient funds charges. To be safe, try to make sure the money is in your account at least one business day before the payment date. If your payment comes out of your account before you make your deposit, you could be in for a nasty surprise.

4. Make sure you fully understand your loan agreement BEFORE you sign.When you apply for a loan, the lender is required to disclose the terms of the loan before you sign for it. Be sure to thoroughly read the loan agreement. The finance charges, payment schedule, and any additional fees should all be disclosed. Also be sure that you have the lender’s business name, mailing address, and phone number. The repayment date(s), how the loan is to be repaid, whether or not the loan can be extended or “rolled over”, and possible penalties for late payments should also be clearly spelled out in the agreement. If there is anything that you don’t understand, contact the lender and have them answer all of your questions before you sign for the loan.

It is also important to pay attention to the real cost of the loan. Let’s say that you are borrowing $300 until your next payday, 14 days from now. Depending on the short-term lender that you select, their fees may be listed as $17.50 per $100 borrowed. For that 2 week period, if you borrow $300 then you will pay back the $300 principal, plus the fees of $17.50 per $100 or ($17.50 x 3 = $52.50) for a total of $352.50. The regulating agencies require that the lenders list this as an APR (annual percentage rate) or the amount of interest that would be charged if this loan was for an entire year. In this case it would be an APR of 421.715%. That number may look scary, however the payday loan you are taking out should be paid back in the time that you initially agreed to, and APR is calculated by what the finance charges would be if you borrowed the money for a year instead of the two weeks you are actually getting it for.

For a greater understanding of APRs and what they represent, please see our article.

By verifying that you are using a legitimate lender, knowing your financial situation and what you really need, and making sure that you fully understand the terms of the loan before you sign for it, you can have the best payday loan experience. Just a little bit of diligence can go a long way toward making sure that a payday loan works for you the way that it was designed- to help you get through those situations where you need some extra cash for a short time.