Payday loans garnered international attention a few years ago due to the high interest rates that customers were obliged to payback.
Now, you hear of them less and less, but are payday loans truly a thing of the past?
Payday Loans Today
Short term, high interest loans, loans with no credit check, otherwise known as payday loans, are a have been around for some time. They are often a last resort for people who need an emergency influx of cash and aren’t able to borrow credit elsewhere. People also take them out when they only need to borrow a small amount of money, so they can get it in their bank as quickly as possible. Although subject to legal ruling in the past with the prominent payday loan service Wonga going into administration. This occurred due to them not making their terms clear enough, which resulted in them paying back their customers. Nowadays, payday loans come with very clear terms, with far more regulations in place for short-term lenders. They also are required to make it clear how much you will be paying back. Repayments are now often over a number of months, rather than one larger amount being collected at the specified date.
Make Your Payments On Time
A key aspect of taking out a payday loan in this day and age is to make your payments on time. Although APR’s have dramatically reduced in the last few years, it is still essential to not miss the repayment deadline. Doing so can lead to mounting fees and rising financial stress, meaning that missing payments is not something to be taken lightly. Make sure that you know your payments schedule, and that you’re able to leave enough cash in your account to cover the repayments. Even better, if you can save to pay off the loan early, it’s worth seeing if you can negotiate an early settlement with reduced interest.
Should I Take Out a Payday Loan?
Before taking out a payday loan, think carefully about how you’re going to pay it back. If you’re short of money this month, really think about whether you’ll have the money plus interest next month? Are you expecting extra income? Or are you going to have to cut back considerably on spending?
Consider whether a loan that you repay in installments might be better for you. Your lender may put you on a repayment plan which changes your monthly payments to an amount you can afford. But this usually extends your loan meaning you pay back more.
When you miss a payment, a lender could report your missed payment to credit agencies, affecting any credit applications you make in the future. Speak to your lender if you are having financial difficulties. Don’t wait until after you have missed a payment.