It’s the end of the year meaning, as we settle into the new year, there are bills waiting to be paid. As a salary earner, having decided to go for a credit facility, you need to compare payday loan products. See how to easily compare two common payday loan products to meet your need.
Payday loans are not for the faint of heart. They can be difficult to repay and could end up costing you much more than you expected if you’re not careful. Before you apply for one, it’s important to know what you’ll get and what’s expected from you in return.
By comparing common payday loan products, you are brought to terms with what loan suits your needs and how to get them.
Payday loans: How do they work?
Basically, there are two types of loans. All other loans usually fall into any of these categories. They include secured and unsecured personal loans. With unsecured loans, you do not need any collateral to obtain them. On the other hand, you need collateral to obtain a secured loan. Remember that if you obtain a secured loan, your home or car as collateral, you are at risk of losing these assets if you are unable to pay back your loans.
A payday loan is a short-term loan that can help you cover immediate cash needs until you get your next paycheck. Often regarded as high-cost loans, payday loan payments are typically due within two weeks—or close to your next payday.
They are known to function differently from personal and other consumer loans. In today’s Nigeria, you can get a payday loan online or through a physical branch with a payday lender.
Once you’re approved for a payday loan, you may receive cash or a check, or have the money deposited into your bank account. You’ll then need to pay back the loan in full plus the finance charge by its due date, which is typically within 14 days or by your next paycheck.
Requirements for payday loans
Payday lenders have a few requirements they consider before approving the loans. Most don’t run a credit check or even require that the borrower has the means to repay the loan.
To qualify for a payday loan in Nigeria, most lenders require that borrowers:
- Be at least 18 years old
- Have an active bank account
- Provide some proof of income (for self-employed people)
- Provide proof of employment (for employed individuals)
- Provide valid identification
- Provide proof of residence
Most payday lenders in Nigeria usually approved the loan in as few as 15 minutes.
In some cases, the borrower is required to submit a post-dated cheque for the loan amount plus other associated fees.
In other cases, especially for online lenders, the borrower grants access to their account for an automatic deduction on the appointed date.
Most payday loans are extended for just a few weeks. When the loan comes due, the borrower either pays off the loan or allows the lender to cash the post-dated check or otherwise make a withdrawal from the borrower’s account.
Compare two payday loan products
By comparing available payday loans, you make it easier to settle for the right product to meet your need. Payday loan terms and costs can vary widely from lender to lender.
To find the best deal for you need to compare interest rates, fees, and terms before you make a decision.
That way, you can find a loan that meets your needs at the most affordable terms. When comparing lenders, here are some of the loan terms you’ll want to review.
Interest rate and APR
The interest rate on your loan is a percentage of the total amount you’re borrowing and has a significant impact on its cost.
You may also see an Annual Percentage Rate, APR, in your loan offer. The APR includes the interest rate plus loan fees, which can give you a better sense of the loan’s true cost.
You’ll also want to pay close attention to the interest type: Is it a fixed rate or variable?
A fixed interest rate can stay the same during your loan. A variable rate can change and possibly increase, during your loan term.
With good credit, you may qualify for competitive rates and terms because lenders consider you to be a less-risky borrower.
If your credit scores aren’t great and you’re not in a rush to borrow, consider working on your credit before applying. This may help you qualify for a more competitive rate.
Payday loans usually come in two types; secured or unsecured.
A secured loan is backed by collateral, like your home or car. But if you’re unable to pay a secured loan back, you may lose the property you used as collateral on the loan.
An unsecured loan, on the other hand, doesn’t require collateral, so you don’t have to worry about potentially losing your property.
A secured loan may come with a lower interest rate than an unsecured loan because the property securing the loan reduces the lender’s risk.
To get the best loan offer, you’ll have to ask whether you want a secured or unsecured loan.
Before you sign any loan offer, you’ll want to check if the lender charges any fees as they can add up during the life of the loan.
Some common fees to keep an eye out for include:
Origination fee; an upfront fee a lender may charge for processing your loan. Origination
Prepayment penalty; a charge that occurs if you pay off your loan early.
Late-payment fee; for when you do not meet up with your loan repayment.
Payday lenders in Nigeria may offer short-term and long-term loans This is why you need to compare two payday loan products to help you make an informed decision. Payday loan terms typically range from two weeks to about three months, but certain lenders may offer an extended loan period.
But a longer term isn’t always better. A long-term loan could result in lower monthly payments, but it may also mean paying more in interest over the long haul.
To compare two payday loan products to meet your need, another factor to scrutinise before settling for a loan is the monthly payment.
Your monthly payment is the amount you pay each month until your loan is paid off. You’ll need to make sure it fits comfortably into your household’s budget so you can eat and pay other bills while repaying debt. But the monthly cost doesn’t tell the whole story about the total cost of the loan.
When you’re shopping for a payday loan, lenders should be able to tell you the total amount you’ll have to pay, including the loan principal plus interest and fees, though this excludes any late fees or insufficient-funds fees you may be charged.
A loan’s monthly payment doesn’t always give you a true picture of the actual cost. Getting a loan with a long term can lower your monthly payment, which makes a loan look cheaper — at first glance. But it can also result in an increase in your overall cost.
Tips for getting the best payday loan offer
Before you sign up for a loan, make sure you are aware of the risks involved and how to get the best terms possible.
Here are some tips that may guide you through getting the best payday loans to offer.
Estimate how much you will have to pay back
The most important step in the process is to be realistic about how much money you will have to pay back.
The lender will likely run a credit check and look at your income for affordability. They will also want to know how and when you will be able to pay them back.
If you can’t show proof that you will be able to pay the loan back in a timely manner, the lender is unlikely to give you a loan.
Know the cost of getting a loan
Before taking out a payday loan in Nigeria, it is important to understand how much it will cost you to get that loan.
Many people take out payday loans without knowing the amount of interest they will be charged or the total amount of money they will be required to pay back.
The exact amount of interest you pay will depend on your credit rating and the terms of the loan.
Research your options
Do some research to make sure you are getting the best deal possible. nairaCompare has taken the burden off you. With only a few clicks, you can see who offers what and decide what best suits your need.
Read the small print
The small print is an often overlooked aspect of any financial transaction. It is where the terms of the loan are written.
It’s important to check the small print when taking out a payday loan to make sure you know what you’re getting yourself into.
Make sure you understand all of the terms of the loan, including the interest rate and how much the total amount of the loan will be. Make sure there is nothing in the small print that is hidden or unclear. You don’t want to get stuck with a loan you may not be able to pay back.
Never borrow more than you can afford
One of the golden rules of borrowing is to never borrow more than you can afford to pay back.
Be absolutely certain that you’ll be able to pay off the debt in full. That means being certain you’ll have the income you need on an ongoing basis to repay, and that you can cut back your budget to afford it.
Don’t borrow when you’re already deep in debt.
Another rule to observe is to avoid loans when you are already in debt.
You can’t solve debt with more debt. Cut your losses and trim your budget before debt snowballs out of control.