Payday Loans Require Responsible Budgeting, Don’t Get Lost in the Numbers
You May Need to Perform a Fair Bit of Math, but It Will Be Worth It in the End
by Kevin Schneider on September 16, 2011
A cash advance can be a great way to keep yourself from falling deep into debt when you need emergency cash. Laws may vary greatly from state to state. But no matter where are you when you apply, it is important to understand what those laws are, the fees they allow, and other important information in regards to your loan, even if you have to do a little math.
Consumer protection laws require all lenders to provide you with detailed descriptions of all the fees, interest rates, and penalties which may be associated with your loan before you have to sign any contract. Some people may take this law for granted, assuming that each loan is pretty much the same and signing their name before reviewing the terms. It is extremely important that you pay attention to exactly how much your loan is going to cost.
Payday loans have a higher interest rate than other types of loans. This is because they do not require collateral or a credit score. Furthermore, the interest rate and fees can be completely different in each state. When you receive the details of your loan, take your time with this information.
It is a great idea to go so far as to take out a calendar and calculator when looking at your loan contract. Look at when you need to start repaying the loan and how much money your next paycheck will allow you to repay at that time. Calculate how much interest you will be charged over the life of the loan and schedule the days you need to make payments.
Crunching the numbers of your loan will allow you the chance to really think about how you will pay off the money you borrow in a timely fashion. It can also give you an idea of how much you may need to change your usual monthly budget in order to account for the added cost of this new loan. Again, never sign anything you have carefully reviewed. If you are confused by exactly how much you may be charged, get help from a friend who can help explain it to you. Your lender should also be able to help you out, but getting the advice of an objective observer, or someone who is biased towards helping you, can mean the difference in your loan experience.
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Consumer Notice: A cash advance, also referred to as a payday loan or payday advance, is a small, short-term loan that is intended to cover a borrower's expenses until the following payday. Cash advances are intended for short-term financial relief and do not constitute long-term financial solutions. Consumers facing debt and credit difficulties should seek out debt and credit advisory help. Consumers are encouraged to consult our State Consumer Resource pages to learn more about the risks involved with cash advances, local laws and regulations that may be applicable to cash advances, possible loan alternatives and recent developments in their state.
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