What to Watch Out When Getting a Payday Loan
When you find yourself in a place where you are short of cash, it is often hard to find ways on how to make ends meet. This usually happens when our expenses for the month exceeds our current cash inflow. During this times we start getting from our savings to offset the shortage. But there may come times where we don’t have enough savings to cover for the shortfall.
Getting a payday loan can prove to be the fastest way to resolve the concern. Although payday loans have a bad reputation, making sure that you manage your loan properly will help you ensure that you avoid the traps of getting deeper into debt. Here are a few things you need to watch out for to ensure that you take the right steps.
- Payday loans are short term loans
Payday loans are short termed in nature. They are due in four weeks or on your pay date whichever may come first. Some payday lenders extend their loans up to 8 months but the payment would then be applied at an installment plan. Because of the loan being short term in nature, it is necessary for the lender to ensure that the principal is recovered soon as possible. Lenders will often recommend the shortest period to ensure that the loan is paid right away.
- Payday loans have capped interest rates
It is usually referred to as loans with the highest interest rates. This is not always true. It may seem high because of the loan being short term but a personal loan may prove to have a higher effective interest rate in the long run. The total interest payment may result for a higher interest rate compared to the actual rate applied on a payday loan.
- Payday loans are easy to get
Because these loans are so easy to get, most people find it as the fastest way to resolve any financial issue. Instead of properly planning their income and expense, they resolve in taking on payday loans to meet their spending requirement. If the borrower starts to let this go out of hand, this is where getting buried in debt actually starts.