Personal Loans and What You Need to Know

Posted on May 3, 2016 By

These days, there are a lot of companies that specialize in personal loans. These loans, which are typically small, are worked out directly between the lender and the borrower. The borrower simply borrows a needed amount and then pays it back on his or her next payday. If the loan amount is large, however, some lenders will work out longer term payment plans to make repayment easier on the borrower. Unfortunately, however, the longer it takes to pay off a loan, the higher the interest charges that will accrue. It is always best to not borrow unless absolutely necessary, and make certain you are confident you have the means to repay the loan with the agreed upon terms.

Because interest rates for payday or personal loans are high, no matter how quickly you pay them back, you should avoid taking out a personal loan “just because.” If you want to do something fun like taking a vacation, a payday loan is not the right choice. These are also not large loans, like for buying a car or a house, so don’t set your sights too high. Just treat payday loans as what they are- a way to survive an emergency situation or to get by until that next paycheck comes through. Consider these types of loans crisis cash. If you are in a crisis, then this is a simple, quick and easy way to de-stress.

It’s also important for you to avoid applying for multiple loans from multiple lenders at the same time. Know the maximum amount you may borrow from different lenders and then choose the one lender that is best able to meet your needs. Having small loans from multiple lenders out at a given time can not only damage your credit, but it can also get you turned down for future loans. Lenders tend to be pretty closely connected and are usually well aware of who has bitten off more than they can chew. Don’t damage your credit or your ability to get cash when you need it by being reckless or greedy.

Because simply applying for a payday loan can negatively impact your credit, be aware of each lender’s eligibility requirements and don’t waste your time applying if you know you can’t meet those requirements. You will likely have trouble getting approved by any lender if you don’t have a verifiable job that you have worked at for at least three months, a checking or savings account, and an income that is above the poverty line. Lenders only want to lend to those they know will be able to pay back the loan. Do yourself and your lender a huge favor by being honest and forthright. Also have verifiable information and documentation available to speed the processing of your loan.

Also bear in mind that your bank account will typically be used to provide you with your borrowed funds and to collect repayments. As such, your checking or savings account should be in good standing without any overdrafts posted or pending. Payments will not be made into an account that’s “in the negative,” so payday loans are definitely not a way to fix your banking mistakes. Do your best to have your financial house in order as best as it can be. Proving to be a new customer that is reliable and trustworthy will help you build this business relationship as well as guarantee a speedy transaction. Payday loans should not become a habit. As long as you understand this information and do your best to handle payday loans responsibly, your experience with these little lifesavers should be a positive one.

Finance