How to Responsibly Use Online Cash Loans
Online cash loans are highly accessible and relatively more useful than traditional loans that are harder to obtain and involve too much red tape. But with this convenience comes with a price as these so-called “payday” loans also come with comparatively higher interest rates. If not responsibly wielded, this tool can ruin your financial well-being and future security. Below are four things you should remember before taking out a payday loan.
Consider Only During Times of Necessity
Online cash loans shouldn’t be your first option, but rather a last resort for emergency funds. Payday loan services must only be used during times of necessity as paying it back can be very tedious compared to how you got the funds in the first place. Companies providing online loans can be manipulative at times and may keep you paying the minimum until you reach a point where you cannot pay back the loan principal plus the interest rates accrued. Situations that may call for a payday loan include emergency hospital bills, college tuition days before your exams, and prescription medication refills. If you are looking for investment capital or to fund your new car purchase, this tool should not be used. For example, if you’re about to get overdrafted by the bank, it may save you money to prevent it by using a payday loan.
Understand the Fees and Costs Involved
It sounds obvious enough yet many people remain oblivious to the fees involved in applying for and securing online cash loans. Although it looks straightforward, many lenders package their loan contracts with deceptively simple terms and conditions. This leads you to believe that the cost you see on screen is what you will be paying throughout the loan’s lifetime.
Keep Things at Low
Low APR and low monthly payments are what makes it easier to pay back your online cash loans. While it’s tricky if not impossible to get both of these loan characteristics at a minimum, strive for a balance between a low monthly payment and low APR. You can accomplish this by shopping for multiple loans at multiple websites before making any commitments to any one lender.
Use P2P Lending
Peer-to-peer lending is also a form of online loan, but with the exception of having lower borrowing limits or what’s known as micro-loans. This means you cannot really rely on them if you have a huge financial obligation that needs immediate attention. Peer-to-peer lending platforms, however, offer the advantage of lower rates and more flexible repayment terms than those offered by banks and credit unions.
Online loans seem like the perfect stopgap for all your financial problems. Used irresponsibly, however, it can worsen your financial state by increasing your debt. The four tips above will eliminate the hassles and common tricks that lenders use to manipulate their loans and take advantage of applicants.