While a small loan offered online may have proven itself to be helpful when in an emergency situation requiring urgent money, it is easy to get trapped into its often-vicious cycle and end up with further financial debt. Getting trapped is very likely especially if you just grab the very first small loan deal you see online. That being said, it definitely remains crucial that you are aware of what you are getting into, and that you have a clear understanding of your rights and responsibilities as a short-term credit consumer. These include understanding the small loan terms and conditions, particularly the rates, charges, and fees that your lender may apply to the loan.
When applying for small loans online, here are important aspects that you need to watch out for in the contract. Being aware of these aspects and agreeing to them is the first step to avoiding troubles and problems with your lender at any point of the contract.
Small Loans Interest Rates
As with other types of loans, lenders of small loans also charge interest rates. The difference though is that interest rates for small loans are quite expensive as compared to traditional types, for instance bank loans. While this is so, there remains a limit as to how much your lender can charge as interest rate. In general, the interest rate for a small loan may start from $15, sometimes more depending on the lender, for every $100. Lenders in some states are bounded by laws that order them to not charge you an interest rate of 30% or more annually. There are, however, some lenders who will try to charge you beyond limit. To avoid overcharges, carefully choose small loan lenders and ensure that their interest rates, although high and expensive, are still within the legal limit.
Small Loans Service Fees
There are many different types of service fees that small loan lenders may charge. Although not all lenders have them, service fees and charges may include those for processing, verification of information, and handling. Also, especially if you are in dire need of cash, an already fast and quick processing of small loans can still be further expedited with an additional fee. And should you change your mind and decide to cancel the loan application, some lenders may also charge cancellation fees.
Small Loan Late Payment Fees
There are times when you would run out of cash and would fail to pay the loan at the agreed time. When such situation occurs, be ready to pay fees for late payment. The amount generally depends on the lender. Even if you know and are assured that you will be able to pay back the loan at the agreed date, it is still wise to find out how much your lender charge for late payments. This way, you won’t be surprised to see extra or unreasonable fees as a result of overdue loans.
Small Loan Renewal Fees
Renewal fees apply to instances when you are suddenly unable to pay the loan at the agreed amount and time. Most lenders of small loan, instead of sending your account to a collection’s agency and having them take care of your debt, would rather extend the loan for another period of time, usually for another month, depending on how you and your lender negotiate.
The no credit check, fast, and convenient processes that an online small loan entails make it very attractive to credit consumers and make it the better option of borrowing money these days. There are also a lot of companies that offer small loans even with bad credit, making these loans very accessible. A good short-term credit consumer, however, will not just go for the first small loan lender generated by Google. As a good credit consumer, you should get to know your lender, find out the charges and fees they apply and for what service, compare them with the ones offered by other lenders, and then select the best one that offers the most reasonable charges.