Are Online Payday Loans Safe?
When you find yourself in a tough financial spot due to unforeseen expenses or other issues, you may turn to a loan to help tie you over. Loans however are often confusing and you can easily become stressed and daunted by the whole situation.
Your first thought may be to pop along to your local bank branch and ask for a personal loan. If you are not in an immediate emergency this might be feasible, but for others they need cash quick and they may not have a good enough credit rating to be approved by a bank. Even if approved the process can take several days.
This is why so many people are now turning to payday loans. You've probably seen them advertised or recommended by other people, but are they safe?
The short answer is yes, payday loans are as safe as any other form of credit. Despite some horror stories the process is perfectly legal in the vast majority of US states and you are not doing anything shady by taking one out. They are regulated, your personal details are kept secure and there are always standard consumer protections in place.
Of course as with any other form of credit there is a certain amount of risk involved. Therefore you should make yourself fully aware of what a payday loan is and the specific policies of the lender you want to go with.
What Are Payday Loans Intended For?
When people call payday loans unsafe or dangerous this is usually because they tried to use the loan for a purpose it was never intended for and got themselves in a cycle of debt. With some education and honesty, this should never be the case.
A payday loan is to cover unforeseen or emergency expenses which deviate from your regular budget, but which can easily be covered when your next pay check is issued.
For example, month to month you are living within your budget with no struggles and then suddenly your car breaks down and you need to get it fixed right away so you can get to work. Your pay check is not for a couple of weeks and you've already spent your disposable income on clothes and some leisure activities.
This is the perfect scenario for a payday loan. You take one out for a few hundred to get the car fixed and pay it back in full at the time of your next pay check. You then tighten your spending over the next month and are soon back to normal.
This is what payday loans in Florida and other states are for, and in scenarios like this it is unlikely that you will struggle to make the repayment.
A payday loan becomes unsafe when your budget is so tight that you cannot make the repayment, or if you're already in debt and want to use it to make other repayments as a way of delaying the inevitable. In these cases you should not take out a payday loan.
Furthermore you are also going to struggle if you overstate your income or borrow more than you know you'll be able to handle.
• Do the calculations yourself, don't assume the lender has done this for you. Sit down and budget how much money you can spare from your next pay check and make sure you do not borrow more than this.
• Don't forget the initial finance charge which is added on top of the principal.
• Budget for other unforeseen expenses. What happens if you've taken out one loan for your car breaking down, but then next month you need money for Christmas presents?
• Never miss repayment due to oversight. Make sure you know the exact date the repayment will be taken from your account and get the money there days in advance.
• If you do miss the payment don't be tempted to take out another payday loan from the same or different lender to cover the debt. This could just get you in deeper debt. Try to work out a payment plan.
• You should also research the background of the company you are borrowing from. The vast majority of lenders are above board and adhere to state regulations, though that doesn't mean there aren't crooks out there. Google their name and see if they are a legit company and whether other people have had trouble with them in the past.