If you're short on cash and unable to borrow funds through conventional sources, a payday loan is great alternative. Payday loans have no credit check; they simply require that you have a bank account and verifiable income.
With a payday loan, you postdate a check or authorize the payday lender to draft your checking account on your next payday. If you don't pay your loan off when it is due, the lender cashes you check or drafts your account to cover the loan. Make sure your payday loan works for you by following these tips.
1. Come Up With a Plan to Pay the Loan Off
Payday loans are not intended to be long-term loans. Instead, they are intended to provide borrowers with extra time to figure a solution to their financial predicaments.
For example, borrowers may take out payday loans to cover unexpected vehicle or home repairs that they need completed as soon as possible. Once borrowers know these expenses are covered, they can come up with a plan to cover these expenses.
Ideas to repay your payday loan include reducing planned spending on discretionary expenditures, borrowing money from a friend or family member, or selling some of your possessions. Having a plan to pay the loan off on time keeps fees and interest associated with the loan as reasonable as possible.
2. Rethink Your Long Term Budget
If you need to take out a payday loan, it is because you are short on cash. Prepare for your next financial emergency by making a comprehensive budget that sets money aside for items like medical expenses, vehicle repairs, and home maintenance. The next time you find yourself in a bind, you'll be in a better position to cover these unexpected expenditures.
3. Understand the Terms
Before signing on the dotted line for the payday loan, it is important to thoroughly understand the terms and conditions. Payday loans usually charge a specified fee for every $100 borrowed. If you know the fee, you'll know exactly how much you'll have to pay back once the loan comes due.
However, you also need to understand what happens if you can't pay the loan by the due date. If you can't pay the loan off, you'll have to roll the payday loan over into a new loan. Then, you'll have to pay the stated fees for both the old and new payday loans.
You may not be able to pay the loan back by its due date. If so, just make sure that you understand the additional fees and ultimate cost of the loan.
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