a payday advance or a cash advance. But do you know what such aIf your credit rating isn’t stellar and you’re considering taking out a small loan for personal needs, then you’ve probably heard of payday loans. They are alternatively referred to as loan entails? More importantly, in spite of the fair amount of mistrust they generate, they can be paid off safely without generating too much interest or fees? Today’s post will cover the basic regulations that govern such loans. We’ll also give you a few useful tips and tricks on how to pay off a payday advance in full and on time.
Basic Terms of Paying off Payday Loans Early and Safely
In the United States, payday lending is regulated at the federal level. The Consumer Financial Protection Bureau governs all lenders no matter how big or small. In other words, payday loans are not the risky, semi-illegal business some make them appear to be. There’s an authority in charge of seeing to it that all lenders operate legitimately. Debtors can refer to this authority when in doubt. Here are the main characteristics of cash advances:
Payday loans require no security. You won’t need to ‘vouch’ for your ability to pay them back with an asset (such as a car or home). Most lenders will run a basic check of your income sources, by asking you to provide a bank statement or a pay stub. Some don’t require a verification or credit check.
Though the term ‘payday loan’ has come to expand past the sphere of loans you need to repay before your following payday, the short-term principle still applies. In most cases, the maturity date is not that far off from the date at which you receive the money. You won’t get much time to pay off loans taken out without any security.
- Independent of credit ratings
In most cases, short-term cash loans are not awarded based on the debtor’s credit rating. This has drawn both criticism against and support of payday loans. The critics argue that lenders make a profit from high interest loans at the expense of low- to middle-income communities. They regard such practices as unethical. Meanwhile, the proponents of payday loans explain that such credit lines have improved household living standards for families which may have exhausted all other options for borrowing money.
Three Tips to Paying off Payday Loans Early and Safely
Some critics of payday loans argue that their fees and interest rates are far too high. Given the high risk rate of such unsecured credit lines, the lenders explain, it’s only fair that the loans should include elevated APRs and costly fees. A recent survey of the field indicated most legitimate lenders only generate some 10 to 12 per cent profit from their credit activities. That being said, if you’ve taken out a payday loan, you’ll want to avoid falling in an endless loop of one loan leading to the next. You’ll also want to pay off the loan in full and in time, so as to avoid the high APR and processing fees. Here are three tested and true tricks on how to pay payday loans off faster.
- Budget for the payoff
As tempting as this infusion of cash might seem when you’re seeking to pay off high interest loans in good time, you’re better off not splurging. Budget for the payoff and avoid spending on items and services you don’t absolutely need. Pay your bills and your debt. But, save money you’d normally spend on entertainment or other non-essentials toward paying back your loan.
- Get a part-time job
This needn’t be permanent. If your schedule and health allows it, pick up a second job. Volunteer your services as a babysitter or maid. Save up every dollar you can afford to save. In order to pay off loans faster, frugality helps. Sometimes, a bit of spare cash is absolutely necessary until you’ve taken care of your debt.
- Try to negotiate with your lender
In some cases, lenders will agree to a rollover for the loan’s maturity date. They may even set up an installment payment plan which will allow you to pay off the debt at a more relaxed pace. These options are not always available. It may be worth a shot since payment plans can truly help those wondering how to pay off high interest loans. They won’t put you off the hook completely, but at least they’ll buy you some much-needed time.