When you need a quick cash of $300-$500, payday loans are good solutions. The process is quick, easy, and straightforward. While the benefits are many, there are some catches, too. You should be aware of both the costs and risks. This will help you make an informed choice.
Borrowers often forget to consider the costs and APRs. This article will help you with the necessary information so that you know you are taking the right loan.
What Are Same-Day Payday Loans?
A same-day loan says you’ll get the money deposited the same day you apply for it. This quick process makes payday loans user-friendly. When you need quick cash, payday loans are often the best solution.
You won’t have to go through a complex bank process. In fact, most banks don’t offer payday loans. There are many reliable applications and online platforms offering these quick cash loans.
Find a reliable and legal lender and apply online. They ask for some basic information and documents. Once you submit the application, if eligible, you’ll get the borrowed money deposited directly to your bank account. The whole process usually takes 1-2 hours.
Different Types of Costs of Payday Loans
When taking a loan from a payday loan provider, you must read their policies carefully. Make sure it clearly describes all the costs associated. This will help prevent future disputes. These loans come with different types of costs, such as:
1. Loan Fee
When taking the loan, the provider will share information about APRs and loan fees. It’s important to calculate APRs to compare different quotes. The fee to take a payday loan can range from $10 to $30 per $100 you borrow for 2 weeks. In that case, the APR can be as high as 400% to 800%/
This is the fee you will need to pay with the borrowed money on your next payday. So, if the creditor demands $15 per $100, then you will have to repay $345 or $575 to close the loan.
2. Rollover Fees
What if you fail to repay the loan? In many states, rollovers are legal, and in that case, you will be charged a rollover fee. Usually, it’s the same as the loan fee.
So, let’s say you took a loan of $500 and cannot repay the total amount of $575. In that case, you can only pay the fee amount of $75. However, on your next payday, you will again have to pay the fee along with the borrowed money, which means $75.
So, you will pay $150 as interest for a loan amount of only $500 in just four weeks.
3. Late fees
In addition to rollover fees, creditors can also charge you with late fees. Therefore, you must read the policies and ensure it’s a fair amount. Many lenders tend to charge exponentially when a borrower fails to repay the loan. This puts them into a debt cycle.
4. Prepaid Debit Card Fees
You may have to pay extra fees for putting the loan money onto a prepaid card. These fees could be for adding money to the card, checking your balance, and calling customer services. Read the loan agreement and also ask the creditors directly to ensure the charges are logical.
Risks & Downsides of Payday Loans
Once again, payday loans offer quick money. This can be helpful for you in the short term. However, there are several risks that you need to be aware of:
1. High Interest And Debt Traps
Payday loans come with a high APR, ranging from 300% to 800%! Such high loans can be difficult to repay, and borrowers often end up taking another loan. Because of the high APR, nearly 80% of borrowers fail to repay the loan in the first attempt. You must do a proper calculation to ensure your ability to repay the money in time.
2. Short Repayment Periods Leading To Rollovers
As the name suggests, you are bound to repay the loan on your next payday, which is usually one or two weeks. Often, it becomes challenging to repay the loan amount in such a quick time. This results in rollovers and you end up paying a high amount for taking a small loan.
3. Impact On Credit Scores If Unpaid
This scheme is a relief for people with a bad credit score. You can get $500 payday loans online the same day without a credit check. Nonetheless, when you cannot repay the loan on time, this can further affect your credit score. This will make taking future loans more difficult. Also, paying the loan on time won’t help you improve your credit score.
4. Legal And Predatory Lending Concerns
There have been various scams and frauds in recent times regarding payday loans. So, before taking a $300 payday loan online, read the agreement. Besides, it’s also not very consumer friendly. Therefore, it’s not been legalized in many of the states yet unlike California. So, before taking the loan, you must ensure it’s legal in your area and the provider is registered. Otherwise, you may be scammed.
How to Borrow Responsibly & Minimize Costs
While the cost of payday loans is high, they are often helpful. As a consumer, you should look for a low APR and better fees. Here are some tips to mitigate the cost of payday loans:
- Only borrow the money you need and stop taking extras. The more money you borrow, the more you will have to return. Taking a small amount will make it easier to repay and also reduce the cost.
- Compare interest rates and fees of multiple companies. You should at least compare 3 lenders before choosing a final one.
- Check repayment terms carefully, and avoid the company with shady policies. This will keep you safe from fraud.
- Consider if you really need to take the money on prepaid cards. If not, then avoid it to reduce the unnecessary prepaid card fees.
- You must try to repay the money on time to prevent rollover fees. Don’t take a new loan for that. Instead, look for alternative solutions.
Alternatives to Payday Loans
If you find the costs and risks of payday loans overwhelming, then you can opt for alternatives, such as:
- Ask a friend or family member for the loan. They will save you from paying high interest rates.
- Use your vehicle to take a title loan. Though it will also have a high interest rate, it’s also an easy solution.
- Consider taking a personal loan from a bank account. While this may not be a same-day solution, the interest rate will be much more affordable.
- Check if you can take a credit card cash advance. This comes with lower rates than payday loans.
- Credit union loans can also be a good option. It has more flexible terms and lower interest.
Frequently Asked Questions
Will taking a payday loan affect my credit score?
Yes, taking a payday loan can affect your credit score when you fail to repay that on time. However, if you pay the loan on time, this won’t improve the score.
What is the average APR for a payday loan?
The average APR for a payday loan can be between 300% to 800%. It’s such high because you are calculating a week-long interest for a year.
Which is better: a payday loan or an installment loan?
This depends on your personal preferences. For quick money, payday loans are better options, while installment loans give you more time and flexibility.
Conclusion
Same-day $300-$500 offers a quick money option for you, usually the day you apply. You get the money quickly and can use it for your purpose. You should also consider the risks and costs, too.
