Payday loans are often used to cover unexpected expenses until the borrower’s next payday. But they come with high interest rates and fees. Consumers should consider other options before getting a payday loan.
Look for lenders that offer low-cost loans and do a soft credit check, which doesn’t damage your score. They should also provide you with information on free debt advice.
Getting a payday loan
Getting a payday loan is easy, but it comes at a high cost. If you’re in financial trouble, you should consider alternatives to payday loans. Many nonprofit credit counseling agencies can help negotiate your debt, and they may be able to offer you more flexible terms. If you’re in the military, you can also take advantage of protections under the Military Lending Act, which caps annual percentage rates at 36%.
Unlike traditional credit, payday lenders don’t conduct a full credit check or ask how you’re able to repay the loan. This can lead to a cycle of debt. In fact, CFPB research shows that over 80% of payday loan borrowers roll over their debt or re-borrow.
Alternatives to payday loans include using a cash advance program through your employer (if permitted), or seeking help from family members and friends. You can also try a debt payment plan or a personal loan from a bank or credit union.
Paying back a payday loan
Payday loan fees are very high, and borrowers often find themselves in debt. However, there are many ways to avoid payday loans, including negotiating with lenders. You may be able to negotiate a repayment plan with your lender or with your bank. The key is to ensure that your expenses and spending do not exceed your income.
Payday lenders typically require borrowers to write a postdated check for the amount borrowed plus the fee, and authorize the lender to electronically withdraw funds from their bank account. This can lead to bounced checks and overdraft fees. Moreover, payday lenders often charge late fees. In some cases, these fees can be as much as the original loan amount.
A better alternative is to ask friends and family for help. Also, you can try to enroll in a credit counseling program. These programs are available through nonprofit organizations, and they can negotiate with creditors to get you better rates.
Defaulting on a payday loan
While payday loans are not usually reported to the major credit bureaus, they can still damage your credit if you don’t pay them back. Many lenders offer borrowers longer repayment periods by allowing them to roll over the loan. However, if you do this, you will continue to pay interest and other fees. Consider contacting your creditors to work out a payment plan. You can also get credit counseling from non-profit agencies.
To repay a Payday Loans Newport News loan, the borrower writes a postdated check for the full amount of the loan plus fees or gives the lender authorization to electronically debit their bank, credit union, or prepaid account. This is typically due on the borrower’s next payday or when income is received, UT such as from a pension or Social Security. The CFPB warns that payday loans can trap consumers in a cycle of debt. It estimates that 80% of payday loans are rolled over and 20% end up in default, which damages credit and can prevent the borrower from getting new payday loans.
Getting a second payday loan
It's possible to get a second payday loan, but it depends on state laws and the lender. Some lenders have a maximum number of payday loans a borrower can have at one time, and others may charge different fees for rolling over or renewing a loan. You should avoid payday loans altogether if possible, and check the Better Business Bureau for Payday Loans Brownsville complaints about the lender you're considering. For active military personnel, there are also special protections through the Military Lending Act.
Payday lenders often charge high interest rates and fees. These loans can quickly become a debt you cannot afford to pay, especially when coupled with regular bills.
You can find alternatives to payday loans, including installment loans with a lower interest rate and longer repayment terms. You can even try to consolidate your payday loan debt with a debt consolidation loan, which can save you money on interest charges and UT improve your credit score.