Payday loans can be a convenient financial tool in an emergency, but make sure you can pay your lender back on time to avoid high interest rates often associated with these cash loans. Many lenders offer rollovers for customers who can’t pay in full, but be careful with this option, as you could end up paying more for your loan than you intended.
Payday loans and cash advances are provided by independent lenders without backing from banks or other bigger financial institutions. Because of this, payday lending is a riskier business for lenders. They charge higher interest rates than a bank or credit union would to compensate for their bigger risk. If not paid back on time, a payday loan could have annual interest up to 400% or higher.
Storefront payday lenders usually require customers to pay off their payday loans in one lump payment on their next payday. If you can’t afford to pay off your loan right away, a lender may offer an extension or a rollover, but payment plans aren’t always flexible.
Online lenders usually offer more flexible payment options, with installment plans usually available for customers who need them. An installment plan will likely cost you less than a rollover, so consider borrowing your payday loan online if you think you’ll need to pay it back in smaller chunks. Instant payday loans have the added benefits of automatic payments withdrawn from your bank account every payday so you don’t have to worry about mailing a check in on time to pay off your loan.
If you need to borrow emergency cash, make sure to take the interest rate into account before you borrow and adjust your loan amount according to what you can afford. When you’re responsible with payday loans, you won’t need to worry about interest rates or payment plans. Be smart and pay back your loan on time to avoid creating additional financial trouble for yourself.