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Tips On How To Compare Payday Loans

Feb 5, 2008
Payday loans are short term loans made to borrowers using the borrower's personal check or electronic access to the borrower's bank accounts as security.

Payday loans are repaid on the next pay date with the original amount borrowed plus any finance charge.

Payday loans size are range typically between $250-$1500 with terms of 14 days or 30 days.

The single most important feature of any product and loans being no exception is the cost associated with it. Typically the cost of payday loans are measured through the Annual Percentage Rate (APR%) which annualizes the interest cost associated with the short term borrowing.

The average cost of 14 day term payday loans ranges between 400%-800% with shorter term loans having higher APR. Although APR measure is a useful measure for comparison purposes it is also important to note the dollar costs associated with the loan.

In comparison other forms of cash advances like credit card cash advances incur an APR cost of approximately 60%.

Speed of approval is an important feature for most that seek out payday loans. Payday loan lenders should state clearly how quickly they approve applications for loans. You can expect instant approvals with most good payday lenders. The deposit of the approved loan is then deposited into the applicants account overnight.

The size of the loan is also worth comparing. Payday lenders typically limit the size of cash advance to $500 or $1,000. It may be worth choosing one with higher limit for future needs instead of changing lender when the need arise. Further flexibility a payday lender usually provides is the facility to extend loan terms if requested.

The online application process should be smooth and while some lenders require fax of documentation in order to approve the lending, most lenders can approve applications without requiring a fax from the borrower. The requirements to obtain payday loans are minimal, with lenders usually requiring an open bank account, steady source of income and identification. Full credit checks are not usually conducted nor are detailed questions asked.

Given the personal nature of the documentation required for payday lending, the final and arguably the most important is the security and privacy policy the payday lender enforces in protecting your privacy. Identity theft and fraud is a very real threat with the spread of the online business and the natural tendency of consumers to drop their guard when they reach their comfort zone. It is important that the payday lender you choose has policies for maintaining high level of security and privacy. The information that is shared with the lender are very sensitive information that can also be used for identity theft.

In summary, the tips above are a very brief introduction on what should be considered before choosing a payday loan lender. It should be noted that the features of payday loans are very much determined by the laws applying in the state that you reside in. For example, limits on the maximum interest rate charged for payday loans differ by each state. Payday lenders must adhere to the laws or face revocation of their license. Hence it is important to check the laws in that state that you reside in to ensure that the payday lender is not breaking any law and that you are not being ripped off.
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