You may find yourself in urgent cash needs, such as fixing a car that has broken down or paying an overdue utility bill. Without an emergency fund, and you have to sort out such situations, your best option would be to apply for quick credit facilities. Before taking payday loans, there are some things you need to understand so you can make an informed decision.
Here are some key consideration while applying for payday loans:
The Amount You Need
Before applying for any form of credit, including payday loans, you need to work out the amount that you need. The reason for this is that loans are costly, and if you get a higher amount than you need, you are only increasing the interest payable.On the other hand, lenders have stringent conditions to be met before one can top up their loan.
Some lenders may need you to have paid a given percentage of your initial debt before applying for another credit facility.You may be inconvenienced if you took a lower amount than you needed since raising the amount to first settle the initial disbursement up to a given percentage may be a tough thing. As such, always calculate the exact figure you need to avoid extra costs or problems seeking an additional loan.
The Cost of the Loan
Generally, payday loans have higher interest rates. It is crucial that as a borrower, you know the interest rate and any other costs so you get to know the exact amount you will be expected to pay. The information can also help you compare various products from different lenders and pick the best. You will also be able to calculate if you can manage to repay to avoid defaulting and messing your credit score.
The Purpose of the Loan
Borrowers must get to know why the lending institutions avail short term credit to borrowers. The products are not intended for use all the time but are meant for emergencies and in the short term. Therefore, it would be illogic to take a payday loan and invest it in a long-term project hoping to repay it with proceeds from the investment. These loans are also not revolving forms of credit or ongoing debt finance like credit cards. As such, these loans are for bailing out those in urgent financial needs. They are to be repaid within a short duration at relatively higher interest rates. Moreover, defaulting them could make you pay much more than you could have ever expected.