Are There Any Restrictions on How I Use My Loan Funds?
We get this question a lot, so here’s some information to consider before you request a payday loan online. If you are approved for an online payday loan, you can use your cash loan for a variety of purposes. Normally for any emergency expense like an auto repair or medical bill or paying utility bills or even covering some checks you issued that may bounce (to avoid those $35 per check NSF fees).
However, there are some things you are not supposed to do with your online payday loan, which is common sense. For example, you cannot use the cash for anything illegal. You can’t use it to gamble, either. Your lender can advise you if you have any questions about usage restrictions.
Things to Consider Before Borrowing
There are some important considerations when you request an online payday loan. Here are a few key points:
Payday loans are fee based, but when you view them from an APR standpoint, the rates are very high. That is why you never want to extend your loan, and you should always be ready to pay it back on time. Payday loans are not intended to be treated like a traditional bank loan.
Risk of getting into a worsening debt situation
Payday loans may lead to a cycle of bad debt. As noted above, if you ‘rollover’ your loan (not legal in many states), then you can end up with more fees and get caught in a worsening debt position.
The loan contract
Lenders are required to provide you with a contract that outlines the costs of your loan as well as the costs associated with missed payment(s) and so on. Most people don’t actually read their contracts before signing. They are so excited they were approved that they don’t review the terms and ask questions about anything they do not understand. Don’t be one of these people! Read and understand your contract BEFORE you agree to sign it.
Different laws in every state
There are different laws regulating payday loans in every state. Be sure to go to your state website if you have any questions about regulations that apply to you.
Repaying Your Payday Loan
Most payday lenders have just two ways they allow for loan repayments:
- ACH withdrawal from your bank account (this is by far the most common method)
- A post-dated check given to the lender to be cashed on your loan due date
You should make a point of knowing what your payment terms are and be comfortable. You should make the payment on the due date. In a few states, your lender may be able to extend your payback period to as much as three months, roll it over (avoid this if at all possible), or renew your loan. However, there are not many states that allow these types of services.
What to Consider If You Don’t Repay Your Loan
If you do not make your loan repayment on the due date (you default), then most lenders will turn you over to a collection agency. Although there are restrictions on what an agency can do, it is best to avoid the harassing calls that come with this process. In most states, you cannot go to jail for failure to pay your loan back on time.
But most states allow penalties or late fees, and these can really add up the longer you are late. This is a situation to avoid at all costs. If the fees build up too much you can be trapped in a cycle where you feel you can’t get out. Also, a lender can sue you in court for the lack of payment. This is rare but, again, avoid getting into this situation.
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