Short-term Payday Loans: What You Should Know Before Applying
When most of us think of a loan, we often think of the big banks and the long waiting process. Well, what happens if you need your loan in less than 24 hours? Unfortunately, most banks are not going to be able to accommodate this request due to all the corporate loopholes that they are going to have to run through.
However, grateful for short-term payday loans, you can receive your money in a few hours.
What are short-term loans?
A short-term loan, also known as a payday loan, is going to be like any other loan that you can apply for at a bank or credit union. A payday lender will be lent against a future paycheck, and the borrowers promise to return the amount with interest. If the borrower does not come with the cash and repay the loan, penalties will apply. However, depending on the lender, some may allow the borrower to roll that loan to another that works with their budget.
Choose the Right Loan
A short-term loan is a great option for those who know that they will be able to pay it off quickly and for those who need the money now. However, before applying for this type of loan, there are some things that you will want to ask yourself –
– Is there any charge out of interest?
– What is the interest rate?
– When do I have to pay the back of the loan?
– How much do I owe you total?
– Is this credible lender?
– What happens if I can not pay the bill outside in time?
– What is the criterion to be approved?
Most of the time, as long as you are working and you can validate your identity, you should have no problem getting one of these loans. However, if you do not have a job, there are lenders that offer short-term payday loans for unemployed people. When applying for one of these loans, just make sure that you do your homework ahead of time to make sure you are getting the best deal for your situation.
What is APR?
In today’s challenging economy, most of us find ourselves in a hurry from time to time. They are four days until the day of payment, but the rent is due tomorrow. Payday loans can be a viable solution to problems like these, where you need a little money to carry it until your next paycheck is credited. Before taking out one of these loans, however, it is very important to understand the terms clearly and know what you are getting. You need to have a reliable system to compare different loan offers that ensure you choose the one that best suits your needs.
The best way to compare different loan products from apples to apples is to compare the annual percentage rate (APR). The APR is defined as the interest and fees that must be paid in comparison with the annualized borrowed amount, and may differ greatly from the simple interest rate.
This is especially true for payday loans that often have interest rates that are deceptive. For example, a payday lender can offer a loan at an interest rate of 20%, which does not sound so bad if you are desperate for money. After all, that rate is comparable to most credit cards. However, with this particular payday loan, the principal plus the 20% interest must be paid in 30 days. This means that the loan has a daily interest rate of 3.2 percent (20 percent divided by 30 days), which extended over a year produces an APR of almost 250 percent (3.2 percent times 365 days) ! Quite a difference from the simple 20% interest rate announced by the lender.
Payday lenders offer a valuable and necessary service, but misunderstanding of the terms of these loans can lead to financial disaster. Before taking one, ask what the APR is so you know the “real” cost of the loan. Make sure it is clear in the repayment term, as well as the fees and penalties to go beyond that time. A little knowledge can take a temporary financial setback to become something Tertius Lydgate worse.