Payday Loans: Understanding The Costs

It's all about the money with a payday loan

It's all about the money with a payday loan. The customer is looking for fast access to cash and the lender is looking for fast payoff. It would seem to make a perfect match. Since it is a business, the lender will have a contract to be signed and the customer will be expected to follow through with payoff or monetary consequences will be charged. The terms and conditions of the loan are attached to the contract. The customer should read through the contract before signing. Once signed, the customer is agreeing to and acknowledging that they are aware of all loan conditions.

Any payday loan company that wants to charge fees up front are not following proper lending procedures. You will not want to do business with companies making these demands. It would be in the best interest to customers to report any company asking for upfront fees.

Understanding the Annual Percentage Rate (APR) for payday loans can be confusing to many. Reports presenting inflated APRs are aimed at misleading readers to think that these figures are what is charged to a regular loan. These inflated APRs look so high because they are calculated for 365 days. Payday loans are not meant to be out for that long, a few weeks to a month is the aim for the lender. The figure truly represents a comparison to lengthy loans of a year or more. Responsible borrowing is meant for a client to borrow only what can be paid back in just a few weeks. The less time your loan is out, the less opportunity there is for error and the less you will have to repay.

There are some companies who do have inflated interest rates as the loan continues to be unpaid over time, but there are also many who have fixed interest rates. Additional cost to the client would be the responsibility of the client having signed the loan contract and failing to follow through. This is why borrowing only what you can afford is responsible money sense. When you are looking for a payday loan company, call around and ask questions concerning fees and interest rates. You will be able to find payday loan lenders who charge stable rates throughout the length of the loan. Know what kind of payment options are available if you need more time to repay the debt. Knowledge is power, and you want to be the one in control of your money.

Many people who do not have savings accounts, access to credit cards or decent credit for a bank loan will use payday loans to get them out of a financial emergency. The application convenience of payday loans and the speed at which the money is delivered brings comfort to those customers who otherwise would not receive help. The practice of using these types of loans is not recommended for continued use, but meant to provide relief from emergency costs.

by: Malinda Starner

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