When taking out pay day loans, it’s crucial to understand how its fees and interest works. Here’s our guide, and how you can make them work for you.
Pay day loans can be pretty appealing. If you’re going through a difficult week or have a serious emergency, a pay day loan could be a lifesaver.
There is a ton of discussion right now about whether or not pay day loans are a good idea. There are many myths that surround pay day loans and how they work, and unfortunately, this deters borrowers from seeking on out.
When it comes down to it, a pay day loan could be a cheaper and safer alternative to missed payments and bounced checks. It is important, though, to understand exactly how pay day loans work and what their interest rates usually are.
Are you ready to get educated and decide if a pay day loan is right for you? Let’s look at the application process, loan process, fees, and rates of interest loans:
What Is A Pay Day Loan?
A pay day loan is a short term loan with a term that lasts (usually) two weeks or until your next pay day. These loans are typically under $500 and serve as breathing room in an emergency, but needs to be paid by your next paycheck.
Pay day loan applications tend to vary, but there are common elements in most pay day loan processes.
Pay Day Loan Interest Rates
When one takes out a pay day loan, they can expect a certain amount of fees that are similar to interest rates.
Luckily for New Zealanders, pay day loan lenders have restrictions when it comes to what they charge you. Particularly with New Zealand compliance laws that lenders need to oblige to when giving loans to clients.
New Zealand is a solid country to get a pay day loan in. Luckily, there are laws in place to protect both borrowers and lenders.
Additional Charges And Fees
While those laws keep lenders from overcharging responsible borrowers and taking advantage of them, lenders do have some power over additional fees and charges that can be applied to default accounts. To “default” on your loan is to fail to pay your loan off on time or at all.
Some additional charges can include:
- “Punishment” fees for failing to pay on time which can continue to accrue if one does not start making payments. Lenders can decide what this amount is, so it is important to read your loan agreement thoroughly before agreeing to take out a pay day loan.
- “Enforcement” charges that are added to your accrued debt if you fail to pay your loan off entirely and the institution is forced to take the matter to the courts.
While terms like “punishment” and “enforcement” sound a little scary, know that you can absolutely arm yourself with knowledge before you take out a pay day loan.
It is important to be absolutely sure that you are able to pay back the pay day loan when your next paycheck comes around. Nobody wants to deal with constant rollovers, and many lenders limit how much of that you can keep doing.
Can Pay Day Loans Really Be A Good Idea?
They can be, absolutely! But it is important to consider a few factors before diving into a pay day loan.
Do I Really Need A Pay Day Loan?
Really think about your current situation. Are you going through a rough time that is temporary (we’re talking one to two weeks temporary) or have your money trouble been a problem for a while?
Have you been temporarily disabled and missed a week of work, but have a paycheck on the way? Can you last with what you have, or do you have bills to pay?
Are those bills’ interest rates and late fees less than the fees a pay day loan would charge? Chances are, especially when it comes to late mortgage payments and late credit card fees, a pay day loan will be a less costly solution.
Can I Pay It Back By The End Of The Loan Term?
This is very important. A pay day loan is a very short term fix for a short term problem. If your financial woes have been going on for a while, perhaps a short term loan isn’t the fix you need.
Make sure you know exactly how much money you will be receiving in wages when your next
Can I Afford The Interest Rate?
As we stated above, interest rates for a small pay day loan are often less costly than late fees and bounced checks.
Be sure to really read into your loan agreement and calculate the interest rate accordingly to be completely sure that your future paycheck can cover the entire loan repayment.
How Much Should I Borrow?
You should absolutely not borrow more than you need. If you have a mortgage payment coming up that is $400, you should only be taking out a $400 pay day loan.
Borrowing short term money for unnecessary purchases is a sure-fire way to get you entangled in debt.
How Do I Apply For A Pay Day Loan?
This is the easy part!
Many pay day loan companies are finally switching over to more convenient website-based applications. Some still require you to physically come to their business to apply for a pay day loan.
You will need documents including your ID, recent bills, rent payments, recent payslips, and other items that vary from lender to lender.
Lenders require these items to confirm your identity and to be sure it is a responsible choice (for you and for the institution) to offer you a short term pay day loan.
For first time borrowers, you may be able to have your loan in your hand in less than half an hour! Talk about convenient.
Are You Ready For A Pay Day Loan?
Now that you’re armed with knowledge, you can figure out if a pay day loan is right for you.
Should you decide to take the plunge and get the quick cash you need, there are a ton of great local pay day loan companies that can help you.
Have you used pay day loans in the past? We want to hear what you have to say. Leave us a comment below!