Payday Cash Loans
Bad Credit Divorce Loan
Personal Finance Planning
Bankruptcy Low
Payday loans: Why they are bad and how to make the best of them
by Dan Johnson
Almost everywhere you look these days you can find advertisements for payday loans. And like other financial products, you can usually conclude that the more a product is advertised, the higher the profit margins it provides for the seller.
Pay Day loans come under the guise of a variety of titles including; cash advance loans, check advance loans, quick cash loans, post-dated check loans, and deferred deposit check loans. But no matter what they call it, the product is always essentially the same.
What are Payday Loans
Payday loans are small quantity, short-term, high interest loans. The way they typically work is that the borrower writes a personal check payable to the lender for the amount they desire to borrow plus the "loan fee". The lending company then gives the borrower the amount of the check minus the "loan fee" in cash. So for example, if you wanted to borrow $100 for two weeks you might write a check for $115 and receive the $100 in cash.
They are targeted towards those individuals who need a small amount of cash for a short period of time. In theory they might be helpful for a family who, for example had an unexpected expense arise this month that they had to pay for right away. This left the family short on funds to keep up with their regular obligations like rent and food. This is the rationale behind the loans and it is the opportunity for individuals to get access to quick cash without the need for extensive credit checks that make the loan, on face value, seem worthwhile.
Why They Are Bad
The problem is in the details. Returning to the example of the person who borrowed $100, let us now imagine that the two weeks are up. And at the end of the term of the loan, the borrower must either "redeem" the check by paying the lender the $115 in cash or roll over the loan for another two weeks. This adds another $15 dollars to the payment meaning that come two weeks later $130 is owed. For those unfamiliar with the lending industry, this may not seem like a bad deal. After all, the lender is taking quite a bit of risk, seeing as he hasn't even checked your credit, right?
Well, not exactly. The most insidious part of Payday loans is the amount of interest they bear. A yearly home mortgage may be in the vicinity of 8%, while a Credit Card, which by most accounts verges on usury, charges in the vicinity of 30 - 40% in interest annually. But comparing that to a Payday loan, which has an annual interest rate of 400 - 700%, is startling.
A Payday loan is one of the most expensive legal lines of credit that a person can procure. On top of that, unlike a regular loan where if you default you can be hassled for late payments, a Pay Day loan company can by contrast simply deposit the check. When it bounces you will have committed a prosecutable crime that the Payday Company can use as leverage to get you to pay at any cost. In effect, they can threaten you, almost immediately, with criminal proceedings in a way that regular creditors cannot.
So why do Payday loans exist. The cynic would simply say that they exist because the lending industry is a powerful lobby that lines the campaigns of many politicians. And while that is certainly true in part, it is also important to consider that despite their shortcomings, Payday loans may fill a useful niche for a very small portion of the population.
Making the Best of Payday Loans
Those individuals who cannot attain credit cards, have no friends or family to loan then money, and cannot procure an advance from their employer, often have nowhere to turn for a bit of extra cash to fill a very short term need. Under these circumstances, and only under these circumstances, can one find an acceptable use for Payday loans. In these types of situations, it is important for borrowers to carefully examine the conditions of the loan. For while it is essential that borrowers avoid the "rollover-trap" the reality is that some will not. And if you fall into that unfortunate few, it is important that you know the contract you have signed.
Of particular note in the contract is:
-What recourse the lender will take if you fail to pay on time
-What the APR of the loan you are taking is
-What the rollover policy of the lending agency is and,
-What their history with pursuing criminal actions against those that default is
While knowing these things and comparing them with their competitors will not convert the decision to take a Payday loan into a pleasant one, it will help limit the damage of those loans and hopefully eliminate the possibility of you slipping into the rollover-trap that captures so many Payday Loan users.
About the Author
Dan Johnson enjoys writing about payday loan topics.
Cash advance loans by Jakob Jelling
A common problem for many people needs a small amount of cash quickly for a short period of time. The loan may be needed for many reasons such as home or vehicle repairs, a medical expense or perhaps you have an opportunity that you can not pass up. If you find yourself needing some money for a short period of time what are your options?
The most common solution is a cash advance loan or a pay day loan. With a cash advance loan you visit a company that gives you the money that you need and you promise to repay them that amount plus fees and interest on your next pay day. While this is becoming a popular option due to its connivance it really should be your option of last resort. Payday loan companies are out there to make money and they do so by charging extremely high interest rates.
If you find yourself in a cash emergency and have a little time available there are several other options that are available to you. If you have reasonable credit than your first option should be your bank. In days gone by you used to be able to get a god faith loan from your bank. Your name and reputation was all that was needed for a small loan and with a handshake you could get a few hundred dollars. This option is no longer there but there are other services that you may be able to use.
The fastest solutions from a bank include applying for a credit card or a higher overdraft on your accounts. Most credit card applications and overdraft applications can be processed while you wait. If you do not need cash that day then you may wish to pursue a line of credit or a small personal loan while you are at your bank. To save yourself time and trouble make sure you have a recent pay stub, a utility bill with your current address on it, proof of income and employment, car insurance papers, a check and your spouse with you. Having all of this together may allow the bank to process and approve you loan on the first visit.
If you have a little more time then another option available to you is your 401K plan. If you are to directly withdraw money from your 401K plan then you will be taxed heavily on it and may be disadvantaging yourself later in life. However if you make arrangements with your employer to repay the amount withdrawn then this is not true. When you arrange to repay the deduction you are not taxed nearly as heavily on your withdrawal and although you will loose some interest in the long run it is much better than retiring without repaying the debt.
If you do not wish to utilize you 401K plan then your next best option is a third party lender. A third party lender can process your loan application and give you a check the same day. Third party lenders will charge more interest than a bank but it is a fraction of what a pay day loan company will charge. Most third party unsecured loans with average FICO scores are less than 20% while a pay day loan company charges and average of 600% for their loans. The amount available will vary with lenders but most companies will not lend less than $750. If you find that you only need $300 and the lowest amount you can borrow is $1,000 then makes sure that you apply all or at least 80% of the unused amount on the loan. The faster you repay the loan the better it is for you.
If you have a cash emergency there are various options available to you depending upon how much time you have. Be sure to carefully consider your options before deciding to use a pay day loan company. With a little work you may be able to secure a loan for the amount that you need within 2 days at a reasonable interest rate.
About the Author
Jakob Jelling is the founder of http://www.cashbazar.com. Visit his website for the latest on personal finance, debt elimination, budgeting, credit cards and real estate.
What to check out when you apply for a payday loan
by Prakash Menon
Are you thinking of going in for a payday loan to meet an unexpected expense? If yes, look into these seven things before you finalize one. This checklist can help you make smarter choices. You might even end up saving some serious cash!
First thing to consider -- do you really need that cash advance? Sure, you need cash right away, but have you looked at other options? The fact is, a payday loan is an extremely expensive source of funds, with Annual Percentage Rates (APRs) ranging from 300% to 1000%. So before you take one, see if you can arrange money by taking an advance from your employer or from your credit union.
You could also consider borrowing money from friends or family. Depending on your situation, credit card funding might be an option too, because it’s usually cheaper than a payday loan. Be careful with this alternative, though.
Ask yourself how much you can really repay when the next payday rolls around. Work out an exact number you can commit to. Take a cash advance only for the amount you can repay, including all charges that apply. Obtain funds from other sources for any additional requirements you may have.
Here’s why. If you choose to roll over all or part of the payday loan, you end up paying much more -- additional charges, late fees, etc. Your APRs start climbing rapidly and you may even find yourself trapped in a vicious cycle of payday loan debt. Stay clear of this trap.
Apply only for one payday loan at a time. Your application gets reported to a consumer tracking database used by payday lenders and banks. If you apply for multiple loans, the lenders may see the multiple applications and you might end up being rejected by all of them.
Go through the lender’s approval criteria very carefully. Apply only to one where you can qualify. If you apply to a company that has stringent criteria and get rejected, that can actually hurt your chances of getting approved by another company with more relaxed criteria.
If you’re applying online, ask yourself if the lender’s website seems professional and well-organized. Do they have clear information and guidelines on the site? A comprehensive FAQ?
If you need clarifications on anything, call up and ask. In fact, it’s a good idea to ask a few questions to each loan provider you’re considering. That way you get a feel for their responsiveness and get additional information to base your decision on.
Most important -- do they have an SSL certificate on the application page? This indicates data is being transmitted securely. Secure pages have web addresses that begin with “https:” instead of “http:” and in addition, you’ll see a lock symbol displayed in your browser. If a lender is using a non-secure page to collect information about you, find another lender!
See this page for 10 things to check out before you finalize a payday loan: http://www.payday-cashadvances.net
Acting on the above points will help you make better choices about payday loans. The best solution is, of course, to get your personal finances into excellent shape so that you never need to borrow in an emergency.
About the Author
Prakash Menon is a financial expert and writer specializing in managing personal debt and providing wealth building solutions. He has written on
paycheck advances, personal debt management and other topics. See for alternatives to payday loans.