If you’re in a tight financial spot and thinking about taking out a payday loan, it’s important to understand how these loans function.
It can be easy to make a rash decision if you’re under financial stress, so before making a loan decision, familiarize yourself with what a payday loan is and consider the pros, cons, risks associated, how it might affect your credit score, and the overall cost of the loan.
At Lending Bear, our team of lending experts in Alabama, Florida, Louisiana, and Tennessee is here to walk you through the process and help you make an informed financial decision. To aid in that process, we’ve created this list of factors to consider before taking out a payday loan.
Firstly, you’ll want to have a thorough understanding of how a payday loan is different from other loans.
A payday loan is a short-term cash advance that is intended to be paid back within two to four weeks and often supplements a borrower’s paycheck until their next payday. These loans are typically around $500 and are meant to cover an immediate, one-time expense.
When considering obtaining a payday loan, you’ll want to make sure you understand the risks associated and carefully weigh your options. It’s always best practice to take out a payday loan for less than your normal paycheck amount. This way you’ll be able to pay back the loan with your next check and still have enough on your paycheck to handle your normal expenses.
If you take out your full paycheck’s amount, you risk either not being able to pay back the loan on time or paying back the loan with your next paycheck and not having enough income to cover the rest of your monthly expenses.
Payday loans are not low-interest loans, and you need to make sure that you take the full cost of the loan into account when honestly assessing whether you can pay back the cash advance on time and in full. Always ask the lender what the full cost of the loan, including interest, will be.
You will typically see lenders charge interest of $10-$30 per $100 borrowed.
So, if you’re taking out a $500 cash advance, you may pay $50 to $150 back in interest in addition to paying back the $500 loan. It’s imperative to make sure you can pay back this interest amount when considering the full cost of the loan.
Choosing a reputable, fair, and responsible lender is just as important as carefully weighing your loan options. You’ll want to make sure you’re working with a lender that doesn’t try to hide fees or misrepresent the loan amount or terms.
At Lending Bear, we are a state-licensed direct lender with an A+ Better Business Bureau rating and are members of INFiN, Borrow Smart and the National Pawnbrokers Association. We follow industry best practices and are committed to fair and responsible lending.
With thousands of 5-star Google reviews and an accessible, in-depth website, potential borrowers can thoroughly research our company and read thousands of customer reviews.
At Lending Bear, we’re here to provide no-fuss, transparent, and quickly accessible payday loans when you find yourself in a financial pinch. Contact us today to learn about options in taking out a payday loan.