Approximately eight out of 10 workers in the United States live paycheck to paycheck. Are you one of them?
If so, chances are you’ve experienced periods of time when you simply don’t have enough money to cover all of your expenses until your next payday rolls around. Maybe you’re in this position right now.
If you are, you might be considering taking out a payday loan. Before you take out a payday loan, it’s important to make sure you understand them fully.
For example, do you know how much money can you borrow when taking out a payday loan? And, do you know how much payday loan fees cost?
Read on to learn more about payday loans and what to expect when you try to take one out.
What are Payday Loans?
Payday loans are a type of short-term loan.
As their name suggests, they are meant to tide you over just until your next payday rolls around. The term length for most payday loans is usually just a couple of weeks or sometimes a month.
Payday loans are known for having high fees and high interest rates. The average interest rate for a payday loan is nearly 400 percent!
Clearly, if you’re going to take out a payday loan, you want to make sure you can pay it back as quickly as possible. Otherwise, you could end up trapped in a pretty vicious debt cycle.
Average Payday Loan Fees
Every year, Americans spend over $9 billion in payday loan fees. What is the average fee for this type of loan, though?
The specific fees you have to pay will vary depending on the amount of money you’re borrowing, as well as the specific lender from whom you’re borrowing the money.
In many cases, payday lenders will charge a $10-$30 fee for every $100 borrowed.
Payday lenders also charge extra fees if you have to roll your loan over.
Some states allow payday loan rollover. This basically means that, if you can’t pay your loan back on the date it’s due, it can be rolled over into your next pay period.
If you do this, you’ll have to pay an extra fee (usually around $50 or so), plus the original loan. You may also have to pay a fee when the extension is over.
Payday Loan Guidelines
As you can see, you need to be careful with payday loans. Otherwise, you could end up paying some pretty exorbitant fees.
That being said, payday loans are not bad. You just have to make sure you have a plan to pay them off as quickly as possible. Here are some guidelines to keep in mind when you’re taking out a payday loan:
Don’t Borrow More Than You Need
Be sure to only borrow the amount of money you need to cover your expenses until your next payday. Even if you do qualify for a larger loan, that doesn’t mean you should take it. This will just lead to higher interest rates and cause you to spend more money paying back the loan.
Have a Plan for the Money
Know exactly why you’re borrowing the money before you apply for the loan. Have a plan for it and only use it for that purpose.
Remember that some reasons for taking out payday loans are better than others. For example, a medical emergency or broken down car is a good reason. A vacation or shopping trip is not.
Stick to One Lender
Avoid taking out payday loans from several different lenders. Not only will this get you into a lot of debt, but it will also make it harder for you to get approved. Stick to just one lender and avoid taking out more than one loan at a time.
Finding a Payday Lender
There are a lot of different payday lenders out there. It can be hard to tell whether or not a lender is legitimate, though, especially if you are applying for a payday loan online.
Keep these guidelines in mind to make sure you’re working with a legitimate payday lender:
- Look for contact information on their website — and try to contact the lender
- Research the lender to make sure they’re accredited with the Better Business Bureau
- Check to make sure there aren’t any complaints against them with the Better Business Bureau
- Read their terms and conditions to find out what fees and charges are associated with their loans
- Make sure they’re in compliance with state regulations (every state has different rules regarding payday loans)
Make sure that the lender you’re considering hiring does not require you to pay any money upfront. You shouldn’t have to pay a fee to borrow money. If a lender asks this of you, you should work with someone else.
Getting Approved for a Payday Loan
Generally speaking, it’s pretty easy to get approved for a payday loan. At the same time, though, there are some general criteria you need to meet, including the following:
- Be at least 18 years old
- Have a valid form of identification
- Provide proof of income
Remember to be honest on your application, too.
It doesn’t pay to lie about your income or any other aspects of your financial situation to try and make yourself look good. In fact, it could end up disqualifying you altogether.
Apply for a Payday Loan Today
Now that you know more about payday loan fees, interest rates, and all the other important factors regarding these types of loans, are you interested in applying for one?
If you’re interested in applying for a payday loan, be sure to keep this information in mind. It will help you navigate the process and make sure you’re protected from any payday loan scams.
If you want to apply for a payday loan, work with us at Bonsai Finance today. We offer high loan amounts — up to $5,000 — and great terms and interest rates.
Apply online today. It’s easy and free, and we’ll get back to you as soon as possible to let you know if you’ve been approved!