4. Access to your bank account is required
Many banking institutions offer customers the convenience of autopay, however they don't require it as a condition of the loan. However, many lenders may require you to write a postdated check for the entire loan balance or that you simply permit them to electronically debit funds out of your checking account. That way, the lending company can automatically withdraw your loan payment when it is due.
5. The lender includes a questionable reputation
Consumers should be cautious about lenders that receive a large amount of negative feedback from customers. To learn more about a lender's reputation, check the Consumer Financial Protection Bureau's complaint database.
Alternatives to high-cost loans
If you need extra cash fast, here are a few other available choices to consider.
- Payday alternative loans – If you're a person in a federal credit union, you may be able to qualify for a payday alternative loan. These can range as much as $2,000 and have terms as much as 12 months. You may be charged an application fee of up to $20, but rates of interest are limited to 28% (though rates of interest may change).
- Installment loans for bad credit – Some lenders specialize in offering unsecured loans to people with a bad credit score or little if any credit history.
- Credit cards – Charge cards aren't recognized for their low interest rates. But APRs on credit cards tend to be lower than other types of short-term small-dollar loans.
- Short-term bank loans – Some banks have begun offering short-term small-dollar loans instead of payday loans. They're still an expensive option but typically have fewer fees minimizing APRs than pay day loans.
Worried about debt due to COVID-19?
If you're worried about paying off debt because of the coronavirus pandemic, take a look at our tips for government resources as well as relief measures that credit card issuers and lenders are offering that can help. We've also got some general advice for paying down debt.
Government relief measures
- CARES Act relief: What you ought to know
- Coronavirus federal, local and state relief measures
Relief measures from various lenders and credit card issuers
- Coronavirus auto loan payment and debt relief: What some auto lenders do to help
- Coronavirus: Mortgage debt settlement programs for homeowners
- Coronavirus charge card payment and debt settlement: How issuers are answering COVID-19
- Coronavirus student loan payment and debt settlement: What lenders do to help
Tips for budgeting and paying down debt
- How to get out of charge card debt
- Credit Karma Help guide to Budgeting
- How to get out of debt in 5 steps
What's next?
Before taking out any kind of loan, it's important to be sure you find affordable to repay it. Regardless how favorable the terms are if you can't make your payments. Next, research lenders you're interested in working with to ensure they're reputable and licensed to do business in your state.
Don't forget to shop around so that you can compare offers. Interest rates, fees and terms can vary among lenders, such as the reputable ones. Finally, read the small print in your loan documents carefully, and don't sign anything you do not understand.
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