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When you’re in need of fast cash, it’s easy to turn to payday loans. They’re pretty easy to get when you just want to get some cash in your pocket to take care of your bills. You don’t think you have options because you have bad credit and it seems like a quick fix.
About 12 million Americans take out payday loans a year. They also pay $9 billion in fees. To avoid the high fees, you should know what payday loans are about.
You need to read this before you sign up for a bad credit payday loan.
1. High-Interest Rates
The one thing that people don’t realize when it comes to payday loans is the interest rate. When you take out a payday loan, you know that there are fees attached.
You take out $500 and there is a fee of $75 for the loan. That’s an interest rate with an APR over 300%.
2. You Have to Read the Fine Print
There are lenders that are out to make a quick buck off of your emergency. You may have borrowed $500 from a payday lender, but what they may not tell you is that they will automatically roll your loan over.
That means even more fees, more interest, and more debt. You have to understand what the exact terms of the loan are. You need to make sure that your loan is paid back on time.
Otherwise, you may find that you have just been paying off fees each paycheck and haven’t paid a dime towards the interest.
3. Look for Additional Fees
It cannot be stressed enough that if you take out a bad credit payday loan, the entire loan and fees need to be paid back on time. That’s the risk you take when you are dealing with payday loans.
You also need to be aware of the potential fees you’ll be hit with if you don’t pay the loan back in time or you don’t have the funds in your account to cover a payment.
Look for items in your contract like fees for non-sufficient funds, interest fees, rollover fees, and late payment fees.
4. Payday Loans Don’t Help Your Credit
If you have bad credit, you want to do everything you can to get your credit score up. Unfortunately, payday loans usually aren’t reported to credit agencies.
Even if you pay your loan back in full and on time, it will not have a positive impact on your credit score.
However, if you take out a payday loan and it goes to collections, you’ll be reported to credit agencies.
5. You Have Other Options
The reason why people turn to a payday loan is that they think that they don’t have any options. That is a huge myth. Even if you have bad credit, you still have options that can be much better than a payday loan.
For example, personal loans offer lower interest rates and you can pay them back in fixed monthly payments over a longer period of time.
You’ll pay less in fees, interest, and you don’t have to pay the loan back in full in two weeks.
Research Before You Get a Bad Credit Payday Loan
People turn to payday loans because they have bad credit and don’t think that they have options to get money in an emergency.
A bad credit payday loan may take care of a short term gap in funds, but you could have a new financial mess on your hands.
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