Nov 30 2015
Payday loans are now a global phenomenon, and the lenders are as varied as the countries from which they operate. Some loan companies, like clubmoney.com.au are above board, with capped interest rates and transparent fees, while others are free to deal as they wish, almost totally unencumbered by APR regulations. It stands to reason, then, that those who find themselves in financial distress are looking at some murky waters. However, when a payday loan is the only option, there are ways to mitigate the risk and avoid exorbitant interest rates as well as dubious repayment plans. But these loans are a two-way street, and the ideal scenario is when both borrower and lender are on the up and up. Here are some strategies to ensure this is the case.
Don’t dig a deeper hole
Before even stepping into a payday loan office, it’s incumbent on the borrower to ensure that he or she is on solid-enough financial ground to make such a loantenable. However, since almost by definition payday loans are geared towards folks in financial dire straits, there is often no ideal scenario. Still, anyone who does not have an active bank account, is not currently employed, does not possess the appropriate documentation, has defaulted on other loans in the recent past, has more than one payday loan currently active, and has mercurial and irresponsible spending habits should not consider a payday loan. Such a loan will likely only exacerbate the problem.
Know the loan fees and charges
Those who feel they can responsibly take out a payday loan should go into the process with eyes wide open. That means knowing all the charges and fees up front, before any contract is signed. Request a fee statement from the lender, and if they are on the up and up they will happily provide it. Know the loan establishment fee, any monthly fees incurred, any payment default fees, or any arrears fees. Avoid excess and hidden charges at all costs.
Opt for a short-term loan
And the smaller the amount, the better. Payday lenders should be upfront about their fees, but that doesn’t mean they won’t be exorbitant. Therefore it only makes sense to borrow a responsible sum in order to offset hefty repayments. Borrowers should only request amounts they know they can pay back in as short a timeframe as possible. Examples of reasonable short-term loans include sums varying from $200 to $2000.
Negotiate your own repayment schedule
The more dubious payday lenders will insist that the principal amount is repaid according to their schedule. There’s no reason to go with a company that is so unaccommodating in their lending policies. After all, the company benefits just as much as the borrower when it comes to issuing a loan. Therefore the two parties should be able to work together. The best payday lenders will work with individual borrowers to craft a repayment plan that suits both parties.
By adhering to the above guidelines, it’s possible to borrow from a payday lender smartly and with mitigated risk of default. Additionally, it’s ideal to select a lender with a robust online application system who can deliver all pertinent loan documents quickly via email.