What to look for when applying for payday loans

Are you thinking of going in for a payday loan to meet an unexpected expense? If yes, look into these seven things before you finalize one. This checklist can help you make smarter choices. You might even end up saving some serious cash!

First thing to consider -- do you really need that cash advance? Sure, you need cash right away, but have you looked at other options? The fact is, a payday loan is an extremely expensive source of funds, with Annual Percentage Rates (APRs) ranging from 300% to 1000%. So before you take one, see if you can arrange money by taking an advance from your employer or from your credit union.

You could also consider borrowing money from friends or family. Depending on your situation, credit card funding might be an option too, because it’s usually cheaper than a payday loan. Be careful with this alternative, though.

Ask yourself how much you can really repay when the next payday rolls around. Work out an exact number you can commit to. Take a cash advance only for the amount you can repay, including all charges that apply. Obtain funds from other sources for any additional requirements you may have.

Here’s why. If you choose to roll over all or part of the payday loan, you end up paying much more -- additional charges, late fees, etc. Your APRs start climbing rapidly and you may even find yourself trapped in a vicious cycle of payday loan debt. Stay clear of this trap.

Apply only for one payday loan at a time. Your application gets reported to a consumer tracking database used by payday lenders and banks. If you apply for multiple loans, the lenders may see the multiple applications and you might end up being rejected by all of them.

Go through the lender’s approval criteria very carefully. Apply only to one where you can qualify. If you apply to a company that has stringent criteria and get rejected, that can actually hurt your chances of getting approved by another company with more relaxed criteria.

If you’re applying online, ask yourself if the lender’s web site seems professional and well-organized. Do they have clear information and guidelines on the site? A comprehensive FAQ?

If you need clarifications on anything, call up and ask. In fact, it’s a good idea to ask a few questions to each loan provider you’re considering. That way you get a feel for their responsiveness and get additional information to base your decision on.

Most important -- do they have an SSL certificate on the application page? This indicates data is being transmitted securely. Secure pages have web addresses that begin with “https:” instead of “http:” and in addition, you’ll see a lock symbol displayed in your browser. If a lender is using a non-secure page to collect information about you, find another lender!

Acting on the above points will help you make better choices about payday loans. The best solution is, of course, to get your personal finances into excellent shape so that you never need to borrow in an emergency.

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