There are five common types of payday loans
When people think about getting a loan, they automatically think about getting a payday loan. This is understandable because payday loans have one purpose – to help you get cash fast! Unfortunately, not all payday loans function the same way. There are five common types of payday loans that people typically get when they apply for a loan.
Cash Advance Only Payday Loans Repayment Plans Payday lending fees are extremely high with these loans. However, the advantage they offer is the ability to get cash faster. With cash advance only payday loans, the borrower must pay off the loan and then make another payment once their paycheck has come in. Because the interest rate is so high with these loans, it is important that borrowers repay them as quickly as possible. Although these are your only options, there are alternatives to cash advance loans that offer better interest rates.
Post-dated Payday Loans Payday lending fees can be extremely high on these types of short-term loans. In addition to high interest rates, most consumers find that they must pay the entire amount before their next paycheck comes in. Because these payday loans often come with an early repayment penalty, many borrowers must pass up getting another loan to pay off their previous one. For this reason, they usually don’t have another option unless they absolutely have to make another payment before their next paycheck comes in.
Unsecured Debt Payday Loans These are essentially the same as cash advance or post-dated loans. The difference is that the borrower must put up collateral – usually a car or home – before they can receive the money. Because the interest rate is often higher on this type of short-term debt, borrowers need to seriously consider whether or not they really need to take out a loan with such high interest rates.
Unsecured Debt Owned Loans These are similar to payday loans, except that the borrowers don’t have to provide any collateral. These loans usually have slightly higher interest rates, but borrowers can get an affordable repayment plan and avoid the long-term pitfalls associated with unsecured debt. They are also a good option for borrowers who just need a little extra cash to get by until their next payday.
Payday Loans vs. Payday Advances When borrowers look at all of the fees involved with payday loans, many people tend to lean towards the loans because they are so inexpensive. However, those who know a little about how the system works may find that they can save more money in the long run by taking out a loan for the amount that they need, instead of using the services of a payday lender. While it is true that payday loans often charge higher fees than traditional short-term loans, there are some ways that borrowers can ensure that they receive the lowest overall rate. Below, you’ll learn about some of the factors that lenders consider when assessing your credit, as well as several tips for reducing the overall cost of your short-term loan.