Sunday, August 31st, 2014

Payday loans till your next payday


Money to next payday.

Need extra money to get you to the next payday?

Payday loans comes to the rescue. However, you should be prepared to pay the price which is usually a hefty one. But there are steps you can take to minimize the financial damage when using a payday loan.


What are Payday Loans?

Cash payday loans, post-dated check loans or deferred deposit check loans are high-rate loans and are intended to be used for short term purposes. Emphasis here is on “short term”, usually 14 days as most of us get paid on a bi-weekly basis.


The old economy created the idea of living payday to payday. However, as if that wasn’t bad enough, today’s economy doesn’t even allows you to get to the next paycheck. Current conditions now forces the potential borrower to write a personal check payable to a lender for the amount he or she wishes to borrow plus a fee.

The lender cashes the check and keeps the fee, of course. Ideally, this type of payday loan will get the borrower room to breathe and he/she can pay off the loan when he/she gets paid.

Let’s take a look at an example. Susan Borrower needs $200 and the cost is $30. She writes a check for $230 and the payday lender agrees to hold the check until her next payday that is usually 14 days away. After 14 days, depending on the particular plan, Ms. Borrower takes $230.00 in cash to the lender and takes back the personal check she wrote. Or, she can roll-over the check by paying a fee to extend the loan for another two weeks. Each time she rolls-over the check, she will pay a fee of $30. In theory, if she rolls-over the check for one year, she ends up paying $30 for 26 times or paying $780 for borrowing $200.


How is the payday loan fee calculated?

Usually, payday lenders charge a fixed fee per amount borrowed. For example: $10.00 for every $100.00 you borrow and it can be as high as $30 for every $100.00 you borrow. In the end, this translates into something like 700% annual rate of interest. And some people are worried about the 20% credit card interest rate?.

How can Truth in Lending Act help you?

Under the “Truth in Lending Act”, lenders must disclose the true cost of payday loans, which will help you compare available loan options. Among other information, you must receive, in writing, the finance charge (a dollar amount) and the annual percentage rate or APR (the cost of credit on a yearly basis)

What type of collateral should you have?

Your personal check is the collateral. Reverting back to the old days of my word is my bond. But since many people break their words as easily as they would their bonds, lenders make these loans extremely expensive so that those who do pay will carry the cost of collection from those who do not pay.

What alternatives do you have to payday loans?

Firstly, contact your credit union or small loans company; find out if they offer any short term financial assistance from payday to payday. I know it could be hard to tell friends and family members about your financial hardship, but secondly, swallow your pride a little bit and ask them for help. Just make sure that you don’t swallow your pride too much by not paying them on time.

Thirdly, if you are borrowing to pay other debts or other bills, why not just ask your creditors for more time to pay your bills? Find out what they are willing charge for that service inclusive of late and additional finance charges, or a higher interest rate.

What steps can you take to reduce the cost of a payday loan?

When you need credit, I advise you shop carefully. Compare offers. Look for the credit offer with the lowest APR.

Compare the APR of the payday loan and the finance charge (which includes loan fees, interest and other types of credit costs) of credit offers to get the lowest cost.

Some firms will offer you a low cost guaranteed payday loan that helps you save time in comparison shopping. An example of this type of guarantee is that it “must be a verifiable, bona fide offer from an online payday loan provider. Excludes one-time, promotional offers, rate comparison must be based on a 14 day loan of less than $500.”


How to cure the payday loan problem not the symptom?

Pick up meditation and prayer and I don’t mean bombarding God or whatever higher power you believe in with requests for money. I mean take the time to get to know your “higher self” that will be able to help you look at life in a more balanced and realistic fashion. This knowledge can help you control emotional stuff that are major reasons for out-of-balance expenditures and emotional spending binges. Who knows, you may even be able to have a direct communication with God and straighten out more than your finances, like your attitude and behaviour to uncontrolled spendng.

Remember that the outer world is just a reflection of us inside and we cannot change our outer circumstances without changing what we think in our hearts.

The need for money usually stems from a combination of low income and lack of disciplined spending habits. Take steps to improve your income which usually starts with better money management education. Look for ways to improve your money sense and acquire new skills that can help you get better jobs and higher paying positions. I know it is hard to get enough energy at the end of 50 – 60 hour week to study. But, don’t you rather have the stress of studying for a better future for a limited time than to keep worrying about payday loans for years to come?

Also, with the Internet, you may have small business opportunities that did not exist before.

Take a good look at where your money went since your last payday. If an item shows up over and over, it is no longer a one-time deal. Make a budget that really reflects your monthly and daily expenditures. Try and save a little, so you do not need to live from payday to payday, but have a little financial buffer.

If you need help working out a debt repayment plan with your payday creditors or developing a budget, contact your local consumer credit counseling service. There are non-profit groups in every state that offer credit guidance to consumers. These services are available at little or no cost. Also, check with your employer, credit union or housing authority for no-cost or low-cost credit counseling programs.

Finally, if you decide you must use a payday loan facility, borrow only as much as you can afford to pay with your next paycheck and still have enough to make it to the next payday.

What are the benefits?

So, what are the benefits to this payday loan? It sounds like there isn’t any.

With so many companies cropping out every day offering a payday loan service and thousands of individuals using them and even offering testimonials to their benefits, I have to concede that there are benefits to payday loans.

To start with, many times payday loans are really the only fast alternative to get you out of a financial jam. The qualification is hassle free. You can get a yes or no answer fairly fast and it can be done online.

In most cases there aren’t any credit checks when applying for a payday loan.

Some payday loan payday lenders do not even require you to fax them supporting documentation.

Your payday loan inquiry is kept confidential.

And you can have the payday loan in cash by the next business day.

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