Payday loans are one of the most common forms of short term lending. On the surface, they might seem very simple, and to an extent, that’s true, but there are some questions that you should have in mind when considering a payday loan. Here’s what you need to know about a payday loan and what you should ask your provider before you sign on the dotted line.
A payday loan is a loan in which you can receive a lump sum of money given to you, or deposited into your account, by agreeing to have that money, plus interest, paid back on your next pay date. It is basically an advance on your next paycheck.
These loans can also be referred to as no credit check loans because these lenders don’t need to run a traditional credit check to qualify you. Many lenders will use an alternative credit bureau to gain more insight into your financial background. This will not affect your credit score but it can disqualify you for a loan with the lender.
These loans can be great if you have an emergency and need a moderate sum of money very fast. As long as you’ve got a bank account, proof of income and your current debt obligations are manageable, you should be able to qualify for a loan. Keep in mind that there are some risks associated with payday loans as the interest is higher than you’d receive from a traditional provider like a bank.
It’s important to know that there are several types of lenders when looking for a payday loan. There are state-licensed lenders that are licensed by your state and vetted by your state regulators. There are also tribal lenders which are not licensed by your state and therefore do not have to follow your state guidelines. In most cases, you will pay a higher interest rate when using a tribal lender as opposed to a state licensed lender.
In order to protect consumers, most states will only allow state-licensed lenders to grant a single loan at a time. A tribal lender can and will allow borrowers to have multiple loans with multiple lenders. This type of practice can lead borrowers into potential issues due to the higher interest these products can carry. It is important to factor the cost of these loans against the particular emergency or financial issue you are facing.
Any reputable lender will post their rates on their website or in the store location. If you are new to payday loans, it’s important to compare the cost of the loan or the finance charge with the lenders that you’d like to use for the service. The easiest way to start is to find out what your state allows when it comes to short term loans. The differences in state guidelines can vary widely so it’s important to know what is legal in your state.
As mentioned above, a state-licensed provider, will be your best option for financing as the loans offered by state-licensed lenders will carry a legal rate of interest. A tribal lender isn’t bound by any state laws or regulations regarding loan amount, interest rate, loan term or number of loans outstanding at a time. The lack of consumer protections associated with tribal payday loans makes them the least attractive loan option.
If you’re unable to repay your loan on your due date, many states have repayment options that can make it easier to manage paying back the loan. It’s important to know your options as each state handles this differently.
Always keep in mind that a reputable payday loan provider is going to be willing to work with you to try and receive their money back. If you’re unable to make a payment, always reach out to your lender to find out what they’re willing to do in order to help you. A trustworthy provider wants to help you as they value your business and they’d rather not send you to collections.
The bottom line, always do your research prior to obtaining a payday loan from a provider. A good place to start is with your state guidelines and the lenders approved by your state.
If you are looking for a payday loan, Lending Bear can help! Simply visit your nearest Lending Bear branch or apply online today to speak with one of our friendly and professional team members.