The How-to of Payday Loans

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The How-to of Payday Loans

The family car breaks down. The furnace is on the fritz. Whatever the reason, you’re in need of a small dollar, short term loan. You’ve heard about payday loans but have never applied before and you’re wondering how to go about it.

Well, here’s the good news. It’s easy.

The following is a step-by-step guide to getting that first payday loan.

Step 1 – Choosing a Lender

To begin, you’ll need to find a lender. Naturally, you’re looking for a reputable lending company. More good news. There are more perfectly respectable payday lenders out there than you can shake a stick at. You can find them, most conveniently, online. Before deciding on a lender, it’s a good idea to shop around, do your research, check out the online reviews and find a company with exemplary ratings that you’re comfortable dealing with.

Using an online lender-finding service is also a good idea. An online loan finder will ask you a few basic questions and then match you up with a lender that best suits your needs. Often, the loan application itself is submitted through the finder.

Step 2 – The Application

Most lenders offer the option of applying in person or online. Naturally, most borrowers prefer the convenience of online application. Either way, having found your lender of choice or chosen a lender-finder to work with, you’ll need to fill out the loan application. This, you’ll be glad to hear, is made surprisingly easy for the borrower and is fast to boot.

You’ll need to provide some basic information – i.e. your personal information, employer or other income source information, the loan requirement, etc. Credit checks are typically not required for payday loans. When credit checks are required, the lending company or finder must notify you and get your permission to run the credit check at which point, you can simply choose to find a lender that doesn’t do credit checks.

One piece of advice concerning the application: before submitting, review your information thoroughly to make sure it’s correct. This is especially important if you’re applying online. Clicking a mouse is so easy but, if some of your information is wrong, it can cause a lot of confusion and slow the application process to a halt.

Step 3 – Signing on the Dotted Line

Having made your loan application and received a lender’s approval, assuming you’ve made your application online, you’ll be required to provide your lender with an electronic signature. Now you’ve entered into a contract with that lender that is both legal and binding so take the time to read carefully the loan’s terms and conditions. Pay special attention to those terms and conditions concerning your repayment schedule and penalties for failure to pay and make sure you’re comfortable agreeing to these terms before signing.

Step 4 – Paying the Piper

You should know that failure to pay a payday loan can result in dire financial consequences. Normally, the way it works is this: on the date your loan payment is up for repayment, the lender will take the full amount of the loan and any applicable fees directly from your bank account. This saves you the bother of having to mail your payment in or make your payment in person at one of your lender’s retail outlets.

It would also seem to offer the added benefit of eliminating late fees. If, however, for any reason you are unable to repay your loan, if your bank account doesn’t have the necessary funds to cover the debt, the cost of your loan can rise exponentially. If you foresee not being able to repay, you do have the option of negotiating a loan extension or rollover with the lender. This, too, will cost you but at least you won’t have a delinquent loan on your hands.

One last caveat. High APRs and pricey service charges can make payday loans financially risky if handled indiscriminately. The best advice when it comes to payday loans is use them only when necessary and, even then, use them sparingly.

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