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Tempted by a Payday Loan? First, Take a Closer Look

It happens to many people. Your finances are fine. You’re meeting all your obligations and paying all your bills. But then, something unexpected (and costly!) happens. It happens. Sometimes you may think you only need a little extra cash to get you through the next payday.

How It Works

Payday lenders enable borrowers to get short-term loans to pay for their next paycheck. These loans are also known as payday loans. When you apply for this type loan, you will be asked to send a post-dated cheque (dated when the loan payment is due), or you may agree to let the lender take the payment directly from the account. It is important to remember that there will not be any small payments. You will have to pay all of the loan and the interest/finance fee at once.

You don’t want to sign the dotted line and leave your finances in worse shape. Here’s some information about payday loans. You can visit Oak Park`s official website for more information.

Costs Can Mount Quickly

Payday lenders often charge a flat-fee, but they can offer loans that are significantly more expensive than the other types. A lender may charge $15 to borrow $100. For $100, a lender may charge $15. This sounds reasonable if you make your payments on time. But what if you don’t make the payments on time? You may choose to renew the loan. Another $15 fee will apply. Now you’ve spent $30 to borrow $100.

Every time you make additional payments on the loan, the fees will increase and it will be more difficult for you to repay. According to CNBC’s recent report, payday loans can charge you up to 700% in interest. This is more than you would pay on other types of loans. Credit card companies might charge you between 12 and 30 percent. How does that happen, you ask?

Let’s see a real-world example provided by NPR. A woman borrowed $600 through a payday loan lender. Then, she was charged $76.45 additional for a loan due 2 week later. The annual interest rate was 300 percent at $76.45. If she had held the loan at the same rate for a year, she would have owed $1800 interest at the end.

Arm Yourself With Information

It is important to understand the facts so you don’t make an impulsive or rash decision.

  • Be skeptical of false promises. Is it possible for a lender to say that no matter what your credit rating or credit history is, you will be approved for a loan? These offers that seem too good to be true often come with terms that could lead you to having more money problems than you originally thought.
  • Do your research. You should verify that the lender licensed in your state if you are looking to obtain a loan. The Consumer Financial Protection Bureau provides a list containing links to websites of state regulators. You can also search the National Association of Attorneys General website for contact information.
  • Talk to an expert. You can speak with a Oak Park Financial, or an on-base financial representative. They will help you to determine your options, and give other financial advice.
  • Search for alternatives to payday loans. This will help you avoid the high interest rates. These are your options.
    Take a look at a personal or share-secured loan.
    Apply for a Checking Line of Credit.
    A cash advance is a way to get cash on your credit card. But be sure you understand the terms and interest rate before you apply.
    If you can’t make a repayment, please contact creditors immediately. Many creditors will work with consumers they trust to be acting in good faith.
    You should have an emergency fund. If you are faced with unexpected expenses, even small deposits to a savings account can help provide some cushion.
  • Additional Protections for Servicemembers. Servicemembers and dependents are entitled to certain protections under The Military Lending Act when they get payday loans or any other form of financing. Payday loans are exempt from the 36 percent annual percentage limit. The rate covers most fees and charges. Credit agreements that are not in compliance with the protections are null.

There are many other options, besides payday loans. Oak Park Financial could be a better choice than payday loans. For more information, please contact us.