Payday loans are often painted in a negative light. One such is that they provide short-term financial relief but at the expense of long-term peace of mind. Some of the downsides usually associated with them include:
- Ridiculously High Interest Rates
- Hidden Fees
- Short & Inconvenient Repayment Terms
- Likelihood of Overdraft Fees
- Little or no Regulatory Checks & Balances in Some Locations
- Adverse Impact on Credit Score & Financial State
- Prepayment Penalties
- Renewal & Rollover Fees
- Aggressive Debt Collection Approach
Frankly, these are well understood, especially in light of some shocking stats. In fact, a research appeared to show that some unscrupulous lenders actually exploit the poor with their offers. You can click here for more on this.
Does this mean they should never be considered by people needing credit lines? Well, not necessarily as the benefits of these credit lines can outweigh their disadvantages. However, this is premised on several things, especially securing them from the right creditor, which is why this article delves into this subject.
Considerations When Picking Payday Loan Lenders
Your experience as one who secures a payday loan is seriously tied to the creditor who lends you the loan. Below are some major considerations when choosing, given how important it is that you secure yours from the right creditor:
1. Verify Licensing
Payday loan creditors are supposed to be licensed to offer their financial services in your jurisdiction. You should start by ensuring this.
This is as a lot can go wrong when you secure such funds from unlicensed options. For starters, one of the implications is that the lender is not bound by local regulations, which is not in your best interest.
2. Loan Fee & Interest Rate Comparison
Several cons are usually associated with payday loans but some are more common than others. High loan costs are one of the very common ones. Thankfully, the competitive nature of the credit market can come to the rescue.
However, this would only happen for people willing to take advantage of the market’s competitive nature by comparing interest rates and overall loan costs. A tool like an online loan comparison calculator can even be used for this purpose. This is all in the spirit of choosing the best deals.
3. Be High on Transparency
Some lenders use something fondly known as the baiting approach. This simply means that they make the borrowing process very easy. However, this is to exploit consumers as much as possible.
It is important to avoid such lenders, which is why adhering to the aforementioned tips is a huge step in the right direction. Furthermore, be very intentional about choosing very transparent creditors for this reason.
For example, you need to be certain that you will not be bound by any hidden fees. Overall, there should be clarity from the lender about a lot of things, including:
- Repayment Schedules
- Loan Terms
- Loan Fees
This ensures that you are not caught unawares because of the introduction of clauses that you were not aware of.
4. Represents Borrower’s Interest
Of course, these creditors are in the business of offering payday loans to consumers and generating revenue in the process. However, there should be a reasonable degree of interest in borrowers besides offering them credit lines.
For example, one that also offers financial advisory services seems like a good choice. You can see https://finquestfinancial.com/ for more information on this. The whole point is checking for signs that suggest that considered options are not predatory lenders.
5. Pay Attention to the Application Process
The quality of the application process can be very revealing. For example, it can reveal how sensitive customer details are valued by the creditor. This is because the right option will protect customer information at all costs, which will be evident in the kind of encryption technology utilized.
6. Physical Address Verification
Illegitimacy is a major issue in this credit market. On one hand, some creditors operate illegitimately and there are red flags that reveal such. One such is when the company in question does not have a valid address.
This is fishy regardless of the online-based nature of many of these company’s operations. Furthermore, it is wise that you confirm the accuracy of any physical address information provided. The reason is that there are also options that lie about where they are physically located.
7. Assess Repayment Flexibility
Borrowers should avoid making irrational decisions when taking out these loans. For example, borrowers need to think long-term and not just about their current needs.
Doing this would help in the true assessment of a payday loan’s repayment flexibility and whether it is good enough. For example, some borrowers may have issues repaying all of the borrowed funds at once. For such people, opting for a deal that allows for payment in installments is a good idea.
8. Reviews & Reputation
Even terrible payday loan creditors will come off as great options through their branding and publicity measures. As a result, there is a need for better ways to confirm the industry reputation of these creditors.
This is why you should utilize online review platforms and very credible ones at that. Pay particular attention to the comments sections and complaints issued. Repeated complaints on certain issues reveal that the creditor is not doing well in that regard.
9. Customer Service
Customer service is important for consumers, regardless of the industry. However, it should be more of a priority for consumers of certain industries and the financial industry certainly ranks high in this regard.
To this end, confirm how well a payday loan creditor does in this regard before deciding to use their credit facility. By the way, you can do this by simply reaching out to ask about certain things before using financial services. You can read this study for more on why customer service is very important in the financial industry.
Conclusion
Although quite a lot of negative remarks surround the idea of securing payday loans, they can be a very helpful credit facility. However, this largely depends on several factors, including the choice of payday loan lender. This is why this article has discussed nine (9) tips for making the right choice, hoping these considerations are factored in when the need arises.
