Understand Your Payday Loan
A payday loan can be a convenient way to borrow money and it’s often less than what a borrower might pay in overdraft fees from a bank if he overdrew from his checking account. But you need to understand that they are meant for the short-term.
Read the Fine Print
Before you sign any type of financial agreement, understand the payday loan requirements, and know what to expect from the start.
Look for Alternatives
If you have bad credit, your ability to get extra funds may be limited. Here are some alternatives:
- A small loan from a credit union may have a lower interest rate than a payday lender.
- Comparing APR and other charges/fees may help you find a better deal.
- Military personnel may have government-backed protections to prevent high fees and interest rates.
- Your state may have protections in place that limit the rates lenders can charge.
- Try asking your creditor for an extension instead of taking out a payday loan. You may be able to work out a payment plan that works better for your budget.
Ask Questions
It’s important to have all of your information clarified from the start so that you do not accidentally forget to pay off your loan, as doing so could result in you getting charged a fee.
- Know from the start whether your loan will be set up to automatically renew. Some loans renew automatically several times, and require the borrower to contact the lender prior to the first due date in order to set up a payment that will end the loan.
- Understand your lender’s privacy policies. Make sure that your personal information is protected.
- Find out about any additional fees in advance. Some lenders charge additional fees for services such as electronically depositing your loan in your checking account, wiring funds to you, or giving you a prepaid debit card that contains your loan amount.
- Know how to contact your lender. Some payday loan companies operate entirely online. Find out how to contact your lender in case you have any questions or concerns about your loan.
- If you have given authorization to deduct funds directly from your checking account, you will need to know how much the lender will withdraw and when that sum will be withdrawn.
Make a budget
Having a responsible spending budget that is within the means of your income – and sticking to that budget – can help you avoid late fees and higher interest rates.
- Consider buying groceries to cook at home, rather than going out to eat before you need to pay off your loan.
- Play games at home or rent a DVD rather than going out to the movies. This will allow you to spend time with your family without paying for theater admission and snack prices.
- Go for a hike over the weekend rather than going to an expensive amusement park. Your family will still enjoy the quality time spent together, and will get fresh air and exercise as a reward!
Enter into an Extended Payment Plan (EPP)
An EPP allows borrowers to extend the repayment period by several weeks without penalty. This can significantly ease some of the burden of typical payday loan repayment plans, as it allows the borrower to get his finances in order.
- Payday loan providers who are members of Community Financial Services Association of America (CFSA) are typically required to offer Extended Payment Plans to borrowers who are interested in this repayment strategy. Check with your loan provider to determine if they are members of CFSA.
- In states with adopted provisions governing EPPs on payday loans, the state-mandated extended payment option is offered in lieu of the CFSA’s Extended Payment Plan.
- Borrowers who took out a payday loan through a CFSA lender must request the Extended Payment Plan by the end of business hours on the last business day before the loan’s due date.
- To request the EPP, a borrower must return to the original loans places where his loan was given within the qualifying timeframe for requesting an EPP, inform the lender of his wish to enter an EPP, and sign an amendment to the original loan agreement that lays out the terms of the new payment schedule.
- CFSA Extended Payment Plans allow a borrower to pay off the loan in four equal payments on a timeline that reflects the borrower’s pay date schedule.
- There is no fee for entering an EPP, but the lender may charge an EPP fee and accelerate the payment on the remaining balance if the borrower defaults on his Extended Payment Plan.
Consider Rolling over Your Loan
Rollovers on payday loans are not always allowed, but in some places local and regional laws permit the rolling over of a payday loan. Rolling a loan over allows borrowers additional time to gather the funds needed to pay back the loan.
