Should you pay off your low cost payday loan quickly? Does it really matter how you handle those payments? The answer is yes to both of those questions, so let’s find out why.
For starters, you need to understand how these payday loans work. It is access to fast cash from a direct lender. Applications are found on the company’s website. Some store locations will have applications online to be filled out, then a trip to the store to finish the process. Both are simple with a few differences in the qualification process. A store will want a signed check to be left as collateral, and an online direct payday loan lender will need to see the most recent 30 bank statement. All qualification information will be listed out on the web page. If you are out and about and happen to have all information needed by a brick and mortar store, then this approach to fast cash may work best for you. If you are at home, the office or anywhere using the latest in cell phone technology, you can apply for an online payday loan. There are companies who use a no fax system to replace the need to fax over bank statements, simplifying the process even more.
Once approved, these low cost payday loan lenders will provide you the cash requested quickly. Storefronts will hand you the money while online lenders will have the money transferred directly into your bank account most often within 24 hours. The payoff is scheduled to correlate with your next pay cycle. That is a fast loan! Since these direct lenders do not check your credit history the loans are considered high risk. This interprets to, the longer the money is out to the borrower, the riskier it is to get paid back. There are fees for this quick cash which are added to the payoff. The lender is a business and businesses will charge for services. The high interest attached to these loans will kick in if they are not paid back on time. The interest charged is much higher than a regular bank or credit union loan. (On a side note here, there are banks and credit unions that are now processing their own payday loans at high rates as well.)
Those borrowers who use the interest rate as incentive to pay the loan back on time are working their finances in a positive direction. The borrowers who do not and the interest increases the balance over the long run have overlooked an important part of this money option. Fast money with a quick payoff. If you take these types of loans out with a bank, your account could be in jeopardy. If you swerved past a responsible lender to take out a loan with one who offered larger amounts of cash in spite of state regulations, the pile of debt will multiply at a much faster rate.
Payday loans lenders have lending policies and fees just like any other financial institution.
Having no credit bureau check or effect on credit score can entice a borrower to use a direct payday loan lender when there is a desperate need for cash. Do you have to pay them back on time? This creditor is no different than any other; if you default on the loan it will be reported. When you are late with payments, you will be charged additional fees. Business is business. It does matter how you handle your payments, especially if you are working on making your financial situation a positive one.
