Are Payday Loans Safe to Get?

May 17, 2021

When it comes to a quick short-term solution to a financial problem, payday loans can be very helpful. Not only do they have minimal requirements, but many lenders offer same-day funding. This makes them especially helpful in the face of small financial emergencies.

But just because they’re easy and convenient to get, doesn’t mean payday loans are right — or safe — for everyone. It also doesn’t mean they’re inherently bad or dangerous, however.

Before you apply for a payday loan, here’s how to make sure you choose a legitimate lender and minimize personal and financial risk.

Are Payday Loans Safe?

Payday loans can be safe, but you’ll need to do your research before choosing a lender.

The first step to finding a legitimate lender is to do your research. Start by shopping around for payday lenders online. Once you’ve found a couple of options, check their Better Business Bureau (BBB) and Trustpilot pages to see what people are saying about them. In particular, see what kinds of ratings or reviews they have and their reputation for resolving customer complaints.

Next, look at the lender’s website and ask yourself:

  • Does it look professional?
  • Is the lender transparent about their rates, terms, and fees?
  • Does the contact information on the lender’s website match with what you’ve found on their BBB, Trustpilot, or Google page?
  • Are there any customer testimonials on the site (not required but can be helpful when making a decision)?
  • Is the website itself encrypted (e.g., HTTPs or HTTP at the start of the domain)?
  • If applying online, does the loan application come with digital security technology?

You should also review the lender’s requirements for getting a payday loan. A legitimate lender will typically ask for your Social Security number, an active checking account, proof of income, and a valid email address or phone number. If they request additional information that you feel is unnecessary, or if they require money upfront, chances are they’re a scam and not safe.

Minimizing the Risks of Payday Loans

Like all loans, payday loans come with a certain level of risk. However, payday loans may be riskier than other types of loans for several reasons.

For one, these loans typically have very short repayment periods — 2 to 4 weeks, on average — and potentially high fees. If you’re already tight on money, it can be hard to pay back what you owe on time.

Some lenders offer a rollover option to borrowers who can’t repay their loan on time. This essentially lets you take out a new loan to pay off the first one. The new loan comes with its own finance charges, however, making it more expensive than the original loan.

The good news is that there are ways to reduce the risk that comes with payday loans. Before taking one out, calculate how much you need to borrow and only request that amount. This will help ensure you don’t end up with more debt than necessary.

Next, see what the total charge for the loan will be and make sure it fits into your budget. Many online lenders offer a payday loan calculator you can use to see what the total amount will be.

If you’re not confident that you can pay back the loan, you may want to consider an alternative option — such as asking a friend or family member for some cash. Otherwise, you can take out the loan without worrying so much about the risk.

Is Getting a Payday Loan Right for You?

If you need some quick cash and can reliably pay back what you borrowed, then getting a payday loan may be right for you. But remember, it never hurts to be cautious when applying for loans.

Do some research into any lenders offering payday loans and make sure they’re allowed to operate in your state. While you’re at it, make sure you can afford the loan payment. By doing this, you can reduce any risks and ensure you’re choosing a safe payday loan for you.