What is a good payday loan?
Compared to other types of consumer loan, the peculiarity of the payday loan is that it is not tied to a specific purchase. This payday loan makes it possible to finance many personal projects and the use of the funds does not generally have to be justified.
Also payday loan is often used to finance:
- unforeseen expenses,
- recreation or family events,
- expenses incurred by the children’s studies,
- decoration or interior refurbishment,
- hifi or video equipment
The payday loan is therefore useful for many projects. However, it can not in any case be used to finance all or part of a real estate project or a professional project. Other types of financing are better suited to these issues.
The 3 criteria to find a good payday loan
Let’s move on to what is a good payday loan . At us we believe that a good payday loan must have:
- a competitive rate
- a contract guaranteeing the flexibility of repayments
- Accessible customer service
A competitive rate
The rates of payday loan offers evolve over time according to several elements (for more information, see the sheet: ” Interest rates: why such differences in rates between offers of consumer loan? “).
And besides, it is not always the same loan agencies that offer the best rates. The peloton of the most competitive loan agencies in terms of rates is renewed very frequently and to know what are the best rates of the moment, it is necessary to use a loan comparator .
Be that as it may, a competitive rate remains the first criterion to evaluate in order to find a good payday loan. And to do this, we must compare the APR (annual percentage rate), which includes all costs related to a payday loan offer (interest, fees …). The APR is always present on the payday loan simulations, on the advertisements as well as on the contracts.
Another element to take into account: borrower insurance. It is optional but highly recommended since it covers borrowers against certain risks such as illness or incapacity for work. The cost of the borrower insurance is not included in the APR. It is expressed through the TAEA (effective annual rate of insurance), which compares the offers in terms of cost insurance borrowers.
A competitive rate is necessary but not enough to identify a good payday loan. As for any purchase, we must evaluate the value for money of the offer! And in terms of payday loan, several elements can appreciate the quality but we want to draw attention to 2 of them:
- the flexibility of loan and its ability to adapt to any changes in the borrower’s budget
- the availability of customer service
Adaptability of the payday loan
The adaptability of a payday loan is its ability to adapt over time to changes in the personal and budgetary situation of the borrower. To assess this criterion it is necessary to check the following with the loan institution:
Possibility of changing the amount of the monthly installments
- The monthly budget of the borrowers can vary for many reasons (increase / decrease of the incomes, emergence of new charges …) and in certain situations it is useful to review the amount of the monthly payments paid in repayment of the payday loan.
- Some payday loan agreements anticipate the possibility of changing the amount of the monthly payments up or down, for a limited period or for the remaining term of repayment.
- For a good offer of payday loan, the loan agreement must be precise and transparent on the change of monthly payment : it is a guarantee of quality of the offer, especially if the loan organization is clear on its policy in the matter and makes it easier for clients to take steps.
- Today, the best payday loan offers on the market can change the amount of monthly payments up to 30% up or down .
- Note that a change in the monthly payment has an impact on the repayment term and on the total cost of the loan (in the event of a decrease in the amount of the monthly payment, the repayment term increases and the cost of loan also).
Possibility of postponing one or more monthly payments
- In the event of temporary difficulties, it is sometimes necessary to postpone one or more monthly payments and thus avoid putting oneself in an uncomfortable situation or risk risking an outstanding payment. Indeed, it is always better for the borrower to anticipate and warn his loan agency if clouds are looming on the horizon.
- However, good payday loan offers also anticipate this possibility and specify the terms of the monthly payment on their loan agreement.
- Again, the terms should be clear and the best payday loan offers allow up to 2 postponements per year (or over the last 12 months) .
- The postponement of the monthly payment leads to an extension of the duration of the loan and the monthly payment carried forward still produces interest. The postponement of a monthly payment therefore increases the cost of loan.
Do you want to compare the rates AND flexibility of payday loan offers at a glance?
With the us loan comparator it’s simple: for each offer, beyond the rate, we indicate if the change of monthly payment or the postponement are possible.