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Avoid 1,000% Payday Loans By Following Five Golden Rules

It’s all over the news. One Virginian woman borrowed $800 for Christmas, but after three months passed, she owed $1,800. With changes to banking regulations making it harder for many to qualify for personal loans, people with poor or no credit are relying on payday loans to cover monthly expenses. Many are falling prey to lenders who charge exorbitant fees and have APRs of 1,000% or more. Avoid these high-interest payday loans by following five golden rules.

Compare Terms

Never settle for the first payday loan you come across. There are sites like EasyAZLoans.com that will take your name, loan amount, and location and then get payday loan companies to compete for your business. This helps you get the lowest possible rate and ensure you’re working with a legitimate payday lender.

Avoid Overseas Payday Lenders

Most states have strict regulations on how much interest a payday lender is allowed to charge. To avoid laws, some payday loan companies are based overseas. This allows them to avoid the maximum interest rates and skirt state laws. Make sure the payday loan company you plan to use is headquartered in your state. This ensures the lender will have interest rates at or lower than your state’s maximum APR.

Understand Repayment Terms

Part of the problem people run into is that they owe the money but don’t have the cash in hand when the repayment date hits. Make sure you know exactly when you must repay your payday loan. Note the date and set reminders if necessary. Your goal must be to ensure the loan is repaid in full when it is due, usually two weeks after you sign the payday loan paperwork. If you don’t have the money when the repayment date hits, you will pay extra in fees and interest. It’s the main reason the aforementioned $800 payday loan skyrocketed to $1,800 in just a few months.

Skip a Payday Loan Until You've Exhausted Your Options

Payday loans are not meant to cover regular bills. They are meant for last-minute emergencies where you’ve exhausted all of your options. Sadly, Pew Charitable Trusts finds that most people take out payday loans to cover monthly rent, utility bills like electricity or heating fuel, and other monthly payments. This is not what payday loans are meant to cover.

If your rent is too much for you to afford, you need to downscale your living expenses. If you have a bill due and need cash, sell items you don’t use to get money fast. If you have two cars and can carpool, sell that additional car. Borrow money from friends or family. Talk to your employer or church to see if they offer loans to employees or parishioners. Ask if you can forfeit your vacation time and cash in those days. Military members can get in touch with the Department of Defense for payday loan alternatives. When you’ve run out of options, then look into a payday loan.

Don’t Be Afraid to Ask for Help

If you have a payday loan and are struggling to repay it, talk to the payday loan company before the due date arrives. See if they are willing to turn the payday loan into an installment loan. In Colorado, two-week payday loans were ended and replaced with six-month installment loans, with an APR of 45%. Call your state to see if there are credit counseling services that work with you to get your payday loan debt paid off.

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