One of the reasons why so many people apply for a payday loan is because it is really quick and easy. Simply navigate to a website, fill a few details in and the money could be in your account in just a few minutes. That is the beauty of payday loans. Because the borrower is able to quickly get their hands on some much needed cash, payday loans direct lender facilities help people to relieve an immediate financial emergency. However, this brings about a new emergency: how to pay the payday loan back. After all, these payments cannot be stretched over a prolonged period of time.
How to Pay Back a Payday Loan
It is very important that you know how to pay back your payday loan before you even apply for it. You usually have just two weeks to pay it back, so this is a plan that you need to have even before you go through your application. It is possible to have the loan extended, in which case you only pay interest and pay the rest of your loan plus further interest after a month, but this makes the loan very expensive. And if you do miss a payment, you will be in serious trouble. Furthermore, your credit rating, which is likely to already be poor, will become even worse.
Some lenders are now offering so-called ‘buy down’ options. This means that you pay back the interest fee each month, as well as a little bit extra until you have paid everything of. While this may sound like a good idea, the reality is that you will pay back more than ten times the amount you borrowed if it takes you long to complete the buy down. The buy down system used to only exist for mortgages, but has now also been adopted by some payday lenders.
There are also some lenders who will now allow you to pay the money back in three or four lump sums. This is often a better option, because it means you have set monthly payments for a short period of time. However, you will still be paying a lot more than you have intended. Furthermore, you cannot apply for a payday loan and expect that they will allow you to do this.
Applying for a payday loan is often a necessary thing for people. However, this does not mean that you have to get yourself into even greater financial difficulty by doing so. What matters is that you prepare yourself before you apply for a loan. Work out whether you really will be able to repay the loan and make sure you don’t find yourself with a new financial emergency at that time. While most payday lenders now have some sort of system that allows for repayment if you have difficulties, you cannot assume that the lender has these types of solutions in place, or that they will be willing to offer them to you.