How to Choose Payday Loan Lender?


Payday loans are short term loans with high costs. The borrower has to repay the loan with his/her next paycheck. The interest charged on payday loans is quite high. Even the Pew Charitable Trusts state that often borrowers face trouble in making their ends meet because of the vicious debt cycle. It is also estimated that in the United States, almost 20% of such payday loan lenders turn out to be a scam.

Therefore, a lot of thought and analysis must go into the decision of choosing the right payday loan lender.

Here are some of the attributes you should consider before finalizing your payday lender:

Analysis of loan amount:

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Before going for payday lending, the first thing a borrower should take note of is to calculate the money needed for the loan keeping the next paycheck amount in mind. One should be assured that the paycheck amount covers the loan amount as well as the interest amount. A larger amount of loan fees implies a higher interest rate. Therefore, only the needful money should be borrowed as the loan amount. It is extremely important to understand fully how do payday loans work before signing up for them.

Filter the certified lenders:

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The best way to know if the company is certified is to check their website. If it is mentioned clearly that they are certified to provide lending services, and if they provide guarantees, only then they are to be trusted.

Research about the regulations:

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It is strongly advised to get familiar with the regulations related to payday lending. These laws and limitations are specific to definite geographical areas. These laws clearly mention the maximum annual percentage rate as well as the fixed interest rates that the companies can charge under various circumstances. Therefore, the most reasonable step would be to consider only those companies that fully comply with regional laws.

Transparency on Pricing Policy:

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Be it long term personal loans or short term payday loans, every potential borrower should be clear about the company’s guidelines related to interest rate, finance charge, late charge, and other pricing policies. In some cases, the company imposes an additional charge if your bank account is not having sufficient funds at the time of loan repayment. Knowing these details will ensure that there are no hidden charges involved in the whole procedure.

Double-check the contact details:

In some of the cases, it may be possible that the contact number provided to you is outdated. Therefore, you should check thoroughly that the company has its physical office in your state. Make sure that the customer service of the company providing a payday loan online is easily accessible on the phone or email. This will also avail a sense of confidence in the company’s operations that they are genuine and not scam.

Know the alternatives:

Payday loans have very high-interest rates and are generally supposed to be paid within 2 to 4 weeks. Moreover, in many cases, they do not improve the credit scores. Therefore, it is wise thought to know the alternative options deeply and see if they can suit the purpose of the loan.

  • Credit Union loan- If you are a member of a credit union, then you may be provided loans that have low-interest rates and can be repaid within six months.
  • Credit Counselling- It is better to treat a persistent financial issue rather than going for payday loans every time. Thus, credit counseling will help you with developing a budget and maintaining your checking account and saving account for meeting your short term and long term financial needs.
  • Credit Cards- The interest rates charged on credit cards is quite less as compared to payday loans. Many credit cards also offer 0% interest rates making them a preferable option over payday loans.


The bottom line here is that all the options have their pros and cons. While payday loans come with exorbitantly high-interest rates, they do not affect your credit score in case of non- repayment, unlike other ‘low-interest’ loan options. Therefore it is best to proceed with utmost caution with payday loans to avoid any kind of debt trap in the future.