Protect Yourself when Getting a Payday Loan

Published on March 28th, 2014

Instant payday loans are those in which you get a loan based on the fact that you have a job and an established bank account. Most people can get the money they need within 24-hours, which makes these types of loans perfect for emergency financial situations like paying late utility bills or medical bills. One thing to remember when applying for a payday loan is that you must protect yourself so that you don’t fall deeper into debt or end up with a damaged credit report.

Lenders Must Be Licensed

The first step in protecting yourself is only using a lender that has the proper licensing. There are lenders out there that offer instant payday loans but don’t have the proper certification to legally make loans. This can make it difficult to get compensation should the lender act unethically and charge you fees or interest rates higher than the going standard. Ask to see proof of licensing before dealing with any lender.

Ask about Fees and Interest Rates

It’s no secret that instant payday loans come with fees and higher interest rates than traditional loans. However, you should always check with your lender to find out the interest rate fee and if there are any additional fees associated with a payday loan. Just because you borrow $100 doesn’t mean only $100 will be taken out of your checking account. You could pay an additional $15-$30 when taking out a payday loan, making the total you owe $115-130. These fees are reasons you shouldn’t make payday loans a consistent way to pay bills, but save it for emergencies or when you need cash before your next paycheck.

Watch Your Credit

A payday loan does not require you to have a good credit history, but it can negatively affect your credit. For this reason, make sure that you are able to repay the loan amount with your next paycheck. If the lender goes to deduct the amount from your bank account and it’s not there, you will be considered delinquent on the account. The lender may choose to report this delinquency to the credit agencies. If you already have bad credit, this will make it worse. If you have great credit, you don’t want something as small as a payday loan affecting your overall credit score.

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