How to Choose the Right Payday Loan Provider?
Surely each of you has ever need fast cash for anything – studying, medical treatment, paying utility bills, buying a new laptop, helping relatives, etc. In this case, you can take out a payday loan online and use it for whatever needs.
Such loans are issued by microfinance institutions. According to statistics, the flow of clients to these organizations is constantly growing.
What are the types of loans issued by microfinance institutions?
- Short-term (Payday loans) – lending periods do not exceed 1 month.
- Medium-term (Point of Sale loans) – lending periods range from several months to several years; they are issued at points of sale.
- Long-term (Installment loans) – lending periods range from 2 years and may exceed 10 days, repayment is similar to bank loans: loans are paid off in equal installments during the term of the contract.
Is it possible to get a guaranteed loan?
It may seem that a payday loan is not issued to people with bad credit. However, this is not the case – many lenders still cooperate with borrowers with bad credit scores.
To increase your loan approval rates, you can contact several financial institutions. Using a loan referral service will boost your approval chances, and you will get matched with the best lender for your unique needs:
What are the common borrower requirements?
Most microfinance institutions have only three standard requirements for their borrowers:
- be of legal age;
- be a US citizen or permanent resident;
- have a steady income.
Sometimes lenders require a second document confirming your identity or income.
Is it worth applying for a payday loan?
You should only take out a payday loan when you really need extra cash urgently and you are sure that you can repay the debt in a short time (1-4 weeks). Also, make sure you cannot make fast money another way. You need to take your time calculating all your planned income and expenses for a month. If the balance is negative, take on additional responsibilities at work or find a part-time job.
What should you consider when choosing a lender?
- Interest rate and term. The interest rate determines the amount of the final overpayment. Try not to take a loan for more than a month, otherwise, the overpayment will be huge. When applying for 1% per day, you will pay 30% of the initial amount for 1 month, and if you extend the loan for another 2 months – you will have to pay already 90%.
- Negative reviews. The best way to find out about a future lender is negative reviews. Do not be too lazy to spend 15-20 minutes studying them. If you fid massive complaints about hidden commissions and huge APRs, this is a bad sign. This will lead to significant overpayment. Reviews about loan rejections, debt collection and the like do not directly relate to the terms of the loan and can be ignored at the lender selection stage;
- Paid services. Unscrupulous companies can connect additional services implicitly, using inattention or even without your knowledge. This can be health and disability insurance, SMS informing, legal advice, and the like. According to statistics, paid services bring 15-20% of all companies’ income;
- Operation mode. Usually, microfinance institutions accept applications around the clock. But the scheme for receiving money can be different, for example, sometimes the first loan can be issued only at the lender’s office and only for a small amount up to $500. Or you may need to undergo through the identification procedure – these may be scanned copies of documents, or you will need to take a selfie with a photo ID near your face or shoot a video. An loan manager can additionally call the borrower.
- Contract for signing. Loan processing is possible only by signing a loan agreement. Keep in mind that electronic signatures have the same legal status as handwritten signatures throughout the United States.
- Correctness of details. Check the data in the agreement: the lender’s name, TIN, legal address, payment details. Checking this data cuts off scammers pretending to be a real company;
- The total loan cost. The agreement must indicate the total cost of the loan, as well as the interest rate. All connected paid services are brought to your attention.
- Penalties. Some companies charge a penalty even if you are one day late on a loan payment. Stay informed that penalties can only be applied to the overdue part of the principal debt, excluding accrued interest.
- Loan extension and its conditions. By applying for an extension, the client will be able to extend the loan term without paying penalties. Usually, one loan agreement can be extended a few times. Renewal is not possible if the loan is overdue. This service can be paid.
- Early repayment. The borrower has the right to repay the loan ahead of schedule without penalties. It is required to inform the lender in advance of your desire for early repayment.
- Funding method. Clients are required to have a personal bank account to receive the funds. Money is usually transferred to the borrower’s bank account within 24 hours, often in 1 hour.
- Bonuses, promotions, loyalty programs. To attract new clients, microfinance institutions conduct marketing campaigns, for example, “first loan is interest-free”. They offer discounts for students, pensioners, as well as on birthdays, or use loyalty programs.
How to take a payday loan on beneficial terms
As a rule, regular borrowers are offered lower interest rates. The average loan term is 2 weeks. The lower the interest rate and term of the loan, the lower the final overpayment. When applying for a payday loan, follow these tips:
- The lowest interest rate is not always the best choice. The most important thing is the total loan cost (the lender may additionally offer paid services). The smaller total loan cost, the more profitable the loan.
- Study negative reviews. Be sure to pay attention if people complain about the same thing, it is likely that this will affect you too;
- Do not borrow more than necessary – you will have to pay interest on the extra amount;
- Make sure that the contract does not include additional services that you do not need. Health insurance, SMS informing and other optional services increase the overpayment up to 2 times or more. It will not be possible to challenge them after signing the loan agreement.
- Choose the maximum loan period, but pay off the loan earlier if it is possible;
- Also, read our 12 tips for first-time payday loan users.
Are there scammers and how can I recognize them?
Sometimes scammers can pretend to be microfinance institutions. Such organizations always operate according to the same scheme – they increase interest and penalties indefinitely. As a result, a person who has taken a small loan, for example, to repair his teeth, loses his apartment or car.
Illegal companies often trade in the personal data of their clients. This is how sellers of personal information appear on the black market.
There is an even worse scenario: scammers may take loans in your name. Naturally, you will not know anything about them until the bailiffs come to you to seize the property.
Companies providing their services illegally often turn to black collectors. Debt from clients is literally “knocked out”, just like in the 90s.
It’s important to understand what the most common loan scams look like and how to protect yourself. Read about the 6 most common loan scams in 2022.
If you come across a loan scam, you need to file a complaint with your state attorney general’s office, the Consumer Financial Protection Bureau (CFPB), and/or the Federal Trade Commission (FTC). Attach documents to the complaint: contracts concluded with fraudsters, receipts for money transfers.
There are many microfinance institutions operating in the US market that issue online payday loans. Such loans are provided without collateral and guarantors, funds are transferred remotely within 24 hours. When applying for a payday loan, it is very important to find a good and licensed lender. Otherwise, you can easily run into scammers. Use loan referral services that cooperate with reputable lenders only – this is a guarantee of reliability and strict compliance with the law.