- Accept an offer.
- Make monthly payments on time to the lender.
Qualification and repayment terms for P2P loans are similar to those of installment loans. For example, if a borrower has a low credit score, they might not qualify for a P2P loan or may need to pay at a high rate. However, an excellent credit score could yield better interest rates than bank and credit union loans.
If you’re a member of a federal credit union that is part of the National Credit Union Administration, you could seek a payday alternative loan (PAL). PALs tend to have lower rates than payday loans. You could use one to avoid high fees or pay off an existing payday loan.
Credit loans ounts from a federal credit union can range from $200 to $1,000, with payment periods of one month to six months. The APR for credit union loans is about 8.86% on average, but they perform hard credit checks that could affect your credit score.
Credit unions also offer unsecured and secured loans. People favor short-term loans from these institutions because credit unions tend to payday loans Idaho consider borrowers’ entire financial picture to determine their eligibility. That means a person could qualify for a credit union loan even if they have a low credit score.
Things to Avoid When Getting Payday Loans
Payday loans are highly beneficial to people with an immediate financial need, but that doesn’t mean they are the best tools for everyone. People with long-term financial struggles could go further into debt by accepting online payday loans.
If you need a pay advance to take care of an emergency like a medical expense or car repair and know you can pay the money back in a short time, a payday advance may work for you. However, it’s still best to exercise caution to prevent accidental debt accumulation.
Not Considering Loan Alternatives
Before accepting any loan, consider all of your options. Sometimes, it’s possible to raise money by cutting back expenses or borrowing from friends and family. You could also earn additional income to put into your savings account with a part-time job or freelance work, but making extra income this way may not be feasible in an active emergency.
Another loan alternative is to sell belongings you no longer need. Instead of listing the item online to find a buyer, you could sell it to a local pawnshop. Unlike pawnshop loans, selling items won’t cost you anything, and you could walk out with cash in hand.
Making Late Payments
Payday lenders have strict payment terms. Traditional loans from banks and credit unions may forgive a late payment and cancel penalties, but that isn’t the case with payday loans. Missing your payment could result in severe consequences, such as:
- Overdraft fees from your bank
- A drop in your credit score
- Calls from collection agencies
Even if you don’t experience a significant consequence, missing a payday loan payment or paying late will force you to spend more on interest and finance charges. Before taking out payday loans, always have a repayment plan in place to prevent future problems.
Not Reading Loan Terms
Your loan’s APR will tell you how much it will cost you to borrow a specific amount of money from a lender. The lender may also attach charges for missing payments or rolling a previous loan into a new contract. The contract will also explain the repayment schedule.
Accepting a loan offer without reading the terms and conditions is dangerous to your financial future. Predatory lending companies often trick consumers by presenting attractive terms upfront while burying excessive requirements like extreme interest rates and short payback periods within the actual terms and conditions.