You hear the complaints from people about payday loans. How lenders are trying to collect and automatically debiting funds from their account. Or, how their lender keeps calling them, bugging them to pay up.
Well, I can tell you that these stories are told by individuals who were likely uninformed on the payday loan process or simply negligent when it came to paying back their loan. The fact is, most payday loans are the simplest form of credit their is. Unless an individual gets into difficult unforeseen circumstances or is completely negligent people using payday loans will not find themselves in this situation.
The terms of a payday loan are completely transparent up front. Typically you know how much you are borrowing, what the exact financing fee is, when it is do and what the repay options are. The key is finding the right lenders. Other forms of debt coming from big banks are definitely not as straightforward. Interest rates rise constantly, credit increases and decreases without your control and new fees introduced because you may not have read the fine, fine print.
The best advice I can give before entering into a payday loan agreement is plan and be prepared. Here are the top reasons people get into trouble with these loans:
1. Poor planning/borrow too much - Before taking out a payday loan make sure you do not borrow more than is necessary or than you can afford. Understand that you need to repay that principle AND financing fees within the next few weeks.
2. Not researching lenders - Stick to online lenders so you can research the best rates and terms easily. Call the lenders before taking out a loan and find out the likely rates and terms you would be accountable for.
3. Not making the minimum payment - I know this is obvious but make sure you do this and plan your other bill payment around this.
4. Not communicating with the lender - Make sure they know if you are hitting a rough patch and most good lenders will help you work on payment arrangement.
5. Income source is not steady - I do not advise taking out a payday loan if you have zero income. BEFORE you take the loan out think of your cash flow and when you will likely be able to repay the loan.
Most importantly, working with a good lender is important as it allows you to manage your finances better.