Getting a Payday Loan: What to Know and Some Different Options
The average amount of loan debt that a person in the United States carries is $38,000. For some of you, that number might seem rather high but the truth is, if you put 10 adults in a room, chances are that a good portion of them are in serious debt.
Given our nation’s debt crisis and the fact that bills never slow down, it stands to reason that many people might get to a place where there’s not enough money to meet their financial obligations.
A popular solution to this problem is to take out a payday loan.
Are you experiencing serious getting payday loan FOMO? Are you curious to know more about what these loans entail?
You’ve come to the right place.
Below, we breakdown payday loans and share with you a handful of potentially helpful alternatives.
Getting Payday Loan: What Does It Entail?
A payday loan is a lending product. The way that they work, in many cases, is that you write your lender a check for the amount of money that you’re borrowing. This amount should equal to or lesser than the amount of money you’re planning on getting from your next paycheck.
Once your paycheck goes through, your lender will cash the check that you’ve given them, plus interest, and your debt will be paid.
In the interim, with your loan in hand and secured by the promise of next month’s check, you can use your borrowed cash to buy whatever it is that you need that could not wait until your next pay period.
Why Do Payday Loans Get a Bad Rap?
It’s hard to find a story today that showcases payday loans in a favorable light. The reason for this is that payday loans come with what is called an interest rate.
Interest rates are pretty simple.
If you borrow $100.00 at a 10% interest rate, you’d owe your lender at the end of the month $110.00 (your original loan amount plus 10%). If you didn’t pay your lender on time, at the end of the month, your loan balance would continue compounding and you’d now owe your lender $110.00 + 10% interest ($121.00).
Most payday loan providers do not offer loans at low-interest rates like 10%. Some charge interest rates that are 50% or higher. Furthermore, certain loan vendors will add a ton of miscellaneous fees to your borrowed money which is also eligible for interest accrual.
Given these seemingly dishonest tactics and the fact that poor people are payday loan provider’s biggest customers, many financial experts and politicians have condemned them.
What Are Payday Loan Alternatives?
If you’d rather not get caught up in the cycle of paying back payday loans, you might have other options to get out of the financial situation that you’re in. Here are some quick-fire suggestions that may be worth exploring.
Talking to Friends and Family Members
If you’re in a tight spot financially and have people that love you, those people might be willing to help you out. It’s always a dicey proposition borrowing money from friends and family since you don’t want to lose your relationship if you can’t pay them back.
Still, if you’re close with people that you know would want to help, let them.
Take Out a Loan From Your Bank
Dealing with payday loan lenders can be tricky since not everyone is offering transparent products like the First Finance payday loan or similar reputable products.
To make sure that you’re borrowing from a lender that is not likely to burn you, try to get a loan from a bank that you trust.
Getting bank loans is subject to credit approval. That means that you could be rejected.
It’s certainly worth trying to get approval though, no matter how bad your credit is, if your alternative is taking out a predatory payday loan.
Talk to the People That You Owe
Communication can go a long way when you owe people money. They’d rather work with you and get what they’re owed back as opposed to putting so much pressure on you that you break and choose to default.
Reach out to the people that you owe and try to arrange to have them forgive portions of your debt or spread it out before going down the getting payday loan path.
You might be surprised by the arrangement that you’re able to come to.
Explore Financial Help
At the end of the day, if you’re really falling on financially hard times, no amount of reading generalized blog posts is going to solve your situation. Sometimes, you need the help of a professional that can look at your specific situation and guide you.
That expert is usually what is called a financial advisor and many communities offer them for free to low-income people.
Go to city hall or run a quick Google search to see if there are free financial planners that work in your area. Steer clear of any planner that works on commission as they might try to move you towards buying products that will only hurt your situation.
Closing Out Our Guide on All Things Payday Loans
Thousands of people type “information about getting payday loan” into Google every day in hopes of seeing whether or not this lending product makes sense.
While we can’t advise you specifically on whether or not you should take the payday loan leap, we do hope that you now feel more informed and can make that decision for yourself.
If you find that you’re in need of more help, our team is here for you! Check out more of the content on our blog and start growing your financial savvy!