Choosing a payday loan is not quite as easy as most people would lead you to think. You need to be really cautious about whether you are being scammed or being suckered into paying interest rates that are actually higher than they look. You also need to be alert so that you do not enter into agreements that are completely one-sided or with agencies that do not conform to an acceptable standard of transparency and disclosure. Given the huge number of payday loan agencies, you need to make a sound decision with a lender that you can trust to avoid being burnt. Some practical tips:
Understand What the Loan Entails
Any kind of a loan, including a payday loan, involves a certain degree of risk for both the lender as well as the borrower. The lender just lends on the basis of a proof of employment and has no comfort of collateral. As a borrower, you also need to appreciate that you will need to have enough income in the next month to cover repayment of both the principal as well as the accrued interest.
What to Look Out For?
The very first thing that you should do is to verify that the lender is licensed and covered by the applicable regulations such as Consumer Credit Acts of 1974 & 2006 besides the Office of Fair Trading. Check out the websites of pay day lenders to see if they have the requisite industry affiliations with bodies like Finance & Leasing Association, as well as clear and transparent lending policies and a dispute resolution mechanism, including details of the concerned financial ombudsman.
Explore, Compare and Scrutinize
Even though you might have a financial emergency at hand, you should take out the minimum time to survey the market before deciding on a particular lender. It is usually better to choose companies that are large and established or a part of a reputed organization. By doing so, you can generally avoid being scammed by unlicensed and unregulated players who will structure the loan agreements completely in their own favor. Checking out their reputation on the website of Better Business Bureau can be a good idea. If extensive research is not your idea of having fun, you can make use of comparison sites that allow you to get the best deals from different lenders with just a single online application.
Despite your hurry to access funds in a financial emergency, you should never decide on a lender without first checking whether the business is legitimate, reputed, and has detailed and clear policies that protect the interest of both parties. Remember, some states like Massachusetts and Florida do not permit payday lenders to operate. Even though most agencies will try and impress you with their speed of loan disbursement, it is advisable not to get carried away but instead check out the interest rates and associated fees very carefully.