5 things you should know about Payday Loans

If you are really in a bind, super strapped for cash, and you can’t pay your bills, you may think turning to payday loans is a good idea. You have heard many terrible tales about people who have had their lives ruined by payday loans, and so you may be a little hesitant. You should be. The reason you should hesitate is because a lot of people take out a payday loan for the wrong reason and it all ends in tears. Here are 5 things to consider before you take out a payday loan

1 Interest rates can take their toll – Payday loans have very high-interest rates. If you are not careful, the interests can turn your loan into a monster. Payday lenders have to be clear about their interest rates (Annual Percentage Rate – APR). An APR is the interest rate you would pay if you took out the loan for a whole year. For payday lenders 5000% APR is about average. Another way that payday lenders give you an idea of what you will be paying in interest is by giving you an interest rate per day, typically 1%. That is all well and good, but the problem comes in when you can’t pay the loan back in time, and the interest starts to mount. So, if you are having a difficult time paying your bills, consider a long term solution. Payday loans are designed to be small loans taken out until the next paycheck arrives.

2. Your banking details – Payday companies can also take payments directly from your bank account. It is called a ‘continued payment authority’ (CPA).Often they are difficult to cancel. See if you can work around having to give out your banking details.

3. You can cancel CPAs – although you will often be told otherwise, you do have the right to cancel CPAs. You can demand from your bank that the CPA is canceled, and any payments made after that point must be refunded to you by the bank.

4. Have you thought of the mum and dad bank? – You could always ask a family member or a friend if they can help you out with a short-term loan. You could then pay it back over a period of time.

5. Double check – Make sure that you know exactly how much you are borrowing. It is important to work out what fees and interested will be added to the amount that you are borrowing. If you are taking out a payday loan, remember that you are not just borrowing the sum that you have applied for. Make sure you are ready to pay it all back. Make sure you can pay it all back.

Payday loans – the keyword is “payday” 

Payday loans are supposed to be super short time loans that you can pay when you get your next pay packet. Hence the word ‘payday’.