A payday loan gives you money quickly. It’s a great help in an emergency, when you are short of cash but have to cover for an unexpected situation. The cash advance is usually for a small amount (between $300 and $2000) and it’s for a maximum of a few weeks (till your next payday). However, in spite of this, some people have problems in repaying their payday loan, just as is the case with any other type of loan.
There can be additional fees when you default and legal consequences as well. Knowing how best to pay off the payday loan is thus going to help you immensely.
Understanding the Payday Loan
- What you can expect – Payday loans are among the most convenient ways of borrowing money. Yes, there is a charge, but it is less than what you have to pay as the overdraft fee to the bank for overdrawing money from your checking account. But, a late fee will be applied if you cannot repay on time, and there will also be rollover rates if the loan term has to be extended. The total amount due as interest can shoot up if you keep the loan repaid for a long time, making it even more difficult for you to pay back.
- Read the fine print – There are some lenders who renew or extend the unpaid loan with a borrower’s consent. It is included in the terms when you take the loan. So read the terms and conditions carefully before you sign any document.
Paying Back the Loan
Do not hesitate to ask the lender if you have any question about the policy. Get all the clarifications you need right at the start so that there is no confusion about when and how to pay back the loan.
- You need to know whether the loan will renew automatically. There are loans that renew automatically and set a new payment date, unless you tell the lender specifically to end your loan.
- Understand the privacy policies of your lender. Ensure that your personal information is always protected.
- Learn about the additional fees before taking the loan. There are lenders who will charge fees for depositing the amount to your bank electronically.
- Find out how best to contact the lender. There are payday lenders who are entirely online. Also, ask about the response time.
- If you authorized the lender to deduct the amount due directly from your bank account, you should know the precise amount that will be withdrawn, and the date when this withdrawal will happen.
Create a Budget
Create a responsible budget within your income. This will give you more fiscal control and help you pay back the loan on time. You can avoid the late fees and interest rates.