How do I Choose the Best Payday Loan?

Tricia Christensen
Tricia Christensen

Choosing the best payday loan takes research and reading the fine print of each loan offer. In many regions, laws require loan companies to be more upfront about interest charges and accompanying fees, but borrowers are still advised to make certain they understand all details of a loan before they obtain it. Some of the things to evaluate when looking for the best payday loan include interest rate, fees, the way the company treats circumstances like extending the loan’s length or early repayment, and professional standing and reputation of the company.

People getting a payday loan.
People getting a payday loan.

Most financial advisors are strongly opposed to the payday loan, unless no other option exists. These are frequently the most expensive ways to borrow money, and if borrowers don’t repay loans swiftly, prices of loan maintenance skyrocket. Some alternatives to the payday loan include getting bad credit personal loans, asking for an advance on a paycheck from employers, pawning or selling valuable items, borrowing money from friends or relatives, or asking a credit card company for a credit line increase.

Many of these alternatives aren’t available, and payday loans become the only means to obtain money quickly. The first things borrowers will want to examine to determine best payday loan are the interest rate and total interest payment. This can be very high, sometimes as much as two to three percent for a loan that lasts a few weeks. In addition to interest, lenders may assess a number of different fees, such as for loan initiation. Fees significantly boost cost and create a true interest rate that is much higher than a couple of percentage points. Ideally, borrowers should look at these rates comparatively, to see if any lender offers lower fee and interest charges.

There are other fees assessed for special circumstances. Some companies charge extra for faster delivery of money. They may also charge much more if the money isn’t repaid in a few weeks and is rolled over into any form of payment plan. In certain cases, lenders even charge for early repayment. The best payday loan should definitely not assess fees for quick repayment.

It’s also vital to research the reputation and professional standing of the company when looking for the best payday loan. In many places, people can use business-reporting agencies to determine if a potential lender has practices that have created a number of complaints. One of the best organizations to find this information in the US is the Better Business Bureau (BBB).

The BBB maintains a record of companies and consumer complaints. Consumers should avoid companies with numerous unresolved complaints or that don’t have any available records. Especially on the Internet, some payday loan companies are actually scams.

Ultimately, the best payday loan has a lower or comparable cost to other companies and has a clean business reputation. Even with the best payday loan, borrowers should plan to swiftly repay the money. This avoids some of the high costs associated with loan extension.

Tricia Christensen
Tricia Christensen

Tricia has a Literature degree from Sonoma State University and has been a frequent wiseGEEK contributor for many years. She is especially passionate about reading and writing, although her other interests include medicine, art, film, history, politics, ethics, and religion. Tricia lives in Northern California and is currently working on her first novel.

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