Many people use payday loans, and you might have heard the term, but let’s see what it is. A payday loan is a type of short-term loan that is for borrowing small sums of money. You can find them everywhere, from large enterprises to small online shops and it’s very easy to get one. However, when you have to pay it back, the sum of money will increase due to the increased interest rate.
There are many things that you’ll have to pay attention to before taking any loan because the banks or the financial institutions have clauses that can be tricky.
Before Taking the Loan
When you apply for your payday loan, make sure that the agent checks if you’re financially credible. It means that the lender needs to make sure that you can pay back the money that you owe each month.
You should receive explanations about the most important features of your loan. For example, you need to know that you will be charged extra money if you don’t pay back in time or that this type of loan is not adequate for long-term borrowing.
The representative of your chosen financial institution should also explain what CPA is and how it works. If you’ve already gone through this process, and you still don’t know what it is, here’s the explanation. CPA comes from continuous payment authority, and it means that you allow the lender to take the money that you owe them each month from your account (the debit card account).
How to Pay It Back
When you take the payday loan, they will say that you can pay it back in one month. At the end of this period, you will have to give back the sum of money that you have taken plus the interest.
Many people choose to pay their payday loan through the debit card account, and they use the CPA – the continuous payment authority.
If you don’t have enough money in your account at the due date, you will have additional charges for late payment.
It’s not recommended to roll over the loan. The agents from the financial institution might tempt you with “rolling over” your credit for another month, and if this happens, expect to pay a larger amount of money when the due time comes. It happens like this because the interest rates will add and you will pay a lot more than you have agreed to in the beginning.
If you can’t pay it back when the time comes, you need to call the lender and let him know. They might freeze the interest rate, or they might help you in creating a payment plan that you can use. It’s important to take just as much money as you can pay back because otherwise, you can end up in a debt spiral.
If taking a payday loan is the only way to get the needed amount of money, you need to pay attention to the contract and the details that it contains. Reading everything is important, even the fine print that is part of the deal.
Don’t forget that you will receive the money almost instantly, but you’ll have to give it back when the time comes. Be sure that you can pay it back and try to use other solutions for improving your financial situation and avoiding more financial problems.