All About Payday Loans
These loans do not provide large sums of money to their customers. The borrower is expected to repay the money within a short period of time.
Who is eligible?
There is no strict criterion mentioned for qualifying for the loan. Generally, everyone over 18 years of age, having a permanent job and holding a bank account are considered eligible.
Some lenders will only insist that the applicant be 18 years of age. Therefore cash loans will be offered even to those who do not hold bank accounts. Furthermore, some lenders even accept other income forms like unemployment benefits.
Difference between conventional loans and payday loans
While a payday loan is designed for meeting unexpected small bills, the former is designed for big items, some of which include buying a new car, holiday, to prevent cheques from bouncing, to make credit card payments or even for debt consolidation.
Moreover, conventional loans have longer repayment duration. In other words, borrowers are able to repay their loan over a period of few years, as against the 30 days repayment period imposed on payday loans.
Lenders of these short term loans are not fastidious when it comes to lending money and often lend money without conducting a credit check. On the other hand banks and finance companies lend their money only to people with good credit rating and good income. No wonder people with bad credit often still get approved.
The biggest difference lies in the rate of interest. Interest rates on payday loans are much higher mainly, because finance companies consider such types of loans to be highly risky.
Application to these types of loans has become child's play because of the internet. It can be filled within a few minutes from your home itself. There is no interview, no wait and no embarrassing questions asked.
There are different types of these loans available. Online payday loans among them is the most popular. Since it is processed through the net, its approval is fast and offer cash to the borrowers almost instantaneously. It therefore serves the urgent need of the borrower. Moreover since the loan taken is not big it can be repaid on time. They are convenient, but use it occasionally and not as an additional source of income.
Borrowers must look into both the pros and cons of payday loans. They must ensure that it is taken only during times of emergency and not taken too often if you do not want to experience crisis in your monthly budget.
Payday Loans: Boon or Bane?
All working people face unexpected difficulty once in a while. If your salary barely covers your exact financial needs every payday, any unplanned expenses can cripple and leave you in deep financial distress. This happens when financial emergencies occur like: a busted kitchen sink, a house heater needing repair, a leaking pipe, and other minor accidents at home that has to be attended to immediately.
Payday loans are one option that you can avail of when these situations occur. In times of extreme financial need, these types of loans can be resorted to as a stop-gap measure to help tide you over the hard times. What then are payday loans? These are otherwise known as cash advance loan, which covers cash emergencies in between paydays. The requirements are basically simple, and availment is quick. However, there are things that you need to know before getting a payday loan, to wit:
1. These loans have higher APR's (Annual Percentage Rate) than regular bank loans. The term is short - the next payday, or roughly around two weeks. Hence, you should not borrow what you cannot comfortably afford to pay the next pay day. Most lenders charge 15% interest for two (2) weeks. Hence, if you borrow $300, you need to pay $345 in two (2) weeks. The effective interest rate of that loan spirals to around 391% per annum, exclusive still of other financing charges. If you are unable to pay at due date, you will be charged an additional $45 plus financing fees for rolling over the loan.
The payday loans have a short maturing period and would be quite expensive if not paid on time. Interest rates are going to shoot up in such levels that paying would become untenable at some future time. Hence, you should only avail of these loans in times of emergencies and in an amount that you can well afford to pay the next payday.
2. The requirement for this loan is quite simple. The payday lender would require you to submit a proof of income, pay stubs, and a valid identification card with photo. You have to submit an application for loan request that would state the amount that you want to borrow, plus interest fees and other financing charges. The payday lender would furnish you a copy of their legal documents that you need to sign. The terms of the loan agreement will be stated which includes: the loan amount, interest rate and financing charges, loan maturity, roll-over fees, among others. You need to issue a postdated check (PDC) to the lender to cover the payment of the loan on maturity date. After all documentation is signed and receipt of the PDC by the lender, cash is given to the borrower corresponding to the amount applied for.
3. You should always consider that payday loans are not modes of regular personal financing. These types of loans can be quite expensive if not paid on time. The rollover cost leads to an upward spiral that can make payment untenable. One thing to remember is that, in payday loans the lender would exert all legal means to exact payment if the PDC you issued bounced on due date. You may have to shell out the cash to fund the bounced check to avoid costly litigation battles later on.
Where to find payday loan lenders?
You can find reputable lenders in various states. Most regular lenders offer payday loans in their pool of financing services. You can search these payday loan lenders from your state and talk to them personally as regards their financing fees and charges. Most states require that lenders give this information to prospective borrowers. You can check on the credibility of these lenders through various government agencies for any complaints regarding fraud or scamming.
There are many materials online that can help you understand about payday loans. There are also some lending institutions that process loan requests online. It is suggested however, that you go into online forums to better understand the mechanics of payday loans. Going to said forums would enable you to find a reputable lender that you can do business with, when times get rough!
Consolacion S. Miravite is a Certified Public Accountant, Real Estate Broker, Lead Farmer, Trader, Accounting Professor, Free-Lance Writer and Blogger. She has written for several companies, institutions and website owners on topics ranging from - Finance, Accountancy, Computers, e-Commerce, Online marketing, crafts, relationships, and others.
Payday loans are one option that you can avail of when these situations occur. In times of extreme financial need, these types of loans can be resorted to as a stop-gap measure to help tide you over the hard times. What then are payday loans? These are otherwise known as cash advance loan, which covers cash emergencies in between paydays. The requirements are basically simple, and availment is quick. However, there are things that you need to know before getting a payday loan, to wit:
1. These loans have higher APR's (Annual Percentage Rate) than regular bank loans. The term is short - the next payday, or roughly around two weeks. Hence, you should not borrow what you cannot comfortably afford to pay the next pay day. Most lenders charge 15% interest for two (2) weeks. Hence, if you borrow $300, you need to pay $345 in two (2) weeks. The effective interest rate of that loan spirals to around 391% per annum, exclusive still of other financing charges. If you are unable to pay at due date, you will be charged an additional $45 plus financing fees for rolling over the loan.
The payday loans have a short maturing period and would be quite expensive if not paid on time. Interest rates are going to shoot up in such levels that paying would become untenable at some future time. Hence, you should only avail of these loans in times of emergencies and in an amount that you can well afford to pay the next payday.
2. The requirement for this loan is quite simple. The payday lender would require you to submit a proof of income, pay stubs, and a valid identification card with photo. You have to submit an application for loan request that would state the amount that you want to borrow, plus interest fees and other financing charges. The payday lender would furnish you a copy of their legal documents that you need to sign. The terms of the loan agreement will be stated which includes: the loan amount, interest rate and financing charges, loan maturity, roll-over fees, among others. You need to issue a postdated check (PDC) to the lender to cover the payment of the loan on maturity date. After all documentation is signed and receipt of the PDC by the lender, cash is given to the borrower corresponding to the amount applied for.
3. You should always consider that payday loans are not modes of regular personal financing. These types of loans can be quite expensive if not paid on time. The rollover cost leads to an upward spiral that can make payment untenable. One thing to remember is that, in payday loans the lender would exert all legal means to exact payment if the PDC you issued bounced on due date. You may have to shell out the cash to fund the bounced check to avoid costly litigation battles later on.
Where to find payday loan lenders?
You can find reputable lenders in various states. Most regular lenders offer payday loans in their pool of financing services. You can search these payday loan lenders from your state and talk to them personally as regards their financing fees and charges. Most states require that lenders give this information to prospective borrowers. You can check on the credibility of these lenders through various government agencies for any complaints regarding fraud or scamming.
There are many materials online that can help you understand about payday loans. There are also some lending institutions that process loan requests online. It is suggested however, that you go into online forums to better understand the mechanics of payday loans. Going to said forums would enable you to find a reputable lender that you can do business with, when times get rough!
Consolacion S. Miravite is a Certified Public Accountant, Real Estate Broker, Lead Farmer, Trader, Accounting Professor, Free-Lance Writer and Blogger. She has written for several companies, institutions and website owners on topics ranging from - Finance, Accountancy, Computers, e-Commerce, Online marketing, crafts, relationships, and others.
6 Smart Alternatives to Payday Loans
A payday loan is a high interest short-term loan designed to be covered within the next pay periods or two. As payment for the loan, the borrower either uses a direct debit authorization to their checking account provides or a post-dated check. Because such loans usually don't require a credit check and a good credit history, people with poor credit history or are with financial problems usually opt for this option. And because of the nature of this type of loan, it's also very easy to fall into a financial debt cycle that may reach up to 400% interest and even more burdens financially.
These types of loans usually becomes very tempting and a very attractive money trap for consumers who find themselves in a financial bind and feel they having ran out of options. There still are other alternatives though. Payday loans is something that need careful handling and extreme caution, and as much as possible, it should be considered a last resort type of solution - and something to get only if you are capable of paying the loan back within the given period. Otherwise, you should seek more consumer-friendly and a more affordable alternative.
Alternatives to Payday Loans:
1. Negotiate repayment options with your creditor. If you're positive that you won't be able to handle your payments on time and feel like you need an extension, call your creditor or loan company and ask for extra time. You can negotiate for a new payment plan that will be suitable for your financial situation. It may come as a surprise, but a lot of lenders are actually willing to work with you and accept your offer for an extension.
2. Get a cash advance from your employer. If your financial need is what one might call an emergency, try to talk to your employer and see if you can avail for a cash advance on your salary. The good thing about this alternative is that it's not really a loan by nature because it's your money in the first place - but you're just getting it a bit sooner than you normally should. This option also is essentially cheaper than a payday loan because, since it's not a loan, it has no interest.
3. Borrow from your savings account. If you have an emergency fund or a secured savings account, try to consider tapping into it. If you don't have one, then it might be time to have one just in case you get another financial turmoil in the future. Starting with a small amount per week can unexpectedly be very helpful and becomes a lifesaver when financial troubles come.
4. Consider a credit union loan. If you happen to be a member of a credit union, try to talk to whomever is in charge with the finances and try to ask if they offer short-term emergency loans to aide members with emergency financial needs. Because these credit unions are focused on the helping members, credit union usually offer lower interest loans that will become more affordable as compared to others -not to mention a more flexible approval rate.
5. Borrow from a friend or a relative. But let me warn you first, be careful of this alternative. If a friend or relative is willing to lend you an amount, make it a point to repay them as soon as possible. A lot of relationships have been ruined because of unpaid debts, and it's something you don't want to get yourself into.
6. Consider Consumer Credit Counseling. If you feel like your financial situation is out of control, considering credit counseling. Come up with a realistic budget make a deal with your creditors on your behalf to negotiate lower monthly payments and interest rates. It's highly essential to make sure you're working with a credible and legitimate counseling service and not a fly-by scam that will just take advantage of your situation.
These types of loans usually becomes very tempting and a very attractive money trap for consumers who find themselves in a financial bind and feel they having ran out of options. There still are other alternatives though. Payday loans is something that need careful handling and extreme caution, and as much as possible, it should be considered a last resort type of solution - and something to get only if you are capable of paying the loan back within the given period. Otherwise, you should seek more consumer-friendly and a more affordable alternative.
Alternatives to Payday Loans:
1. Negotiate repayment options with your creditor. If you're positive that you won't be able to handle your payments on time and feel like you need an extension, call your creditor or loan company and ask for extra time. You can negotiate for a new payment plan that will be suitable for your financial situation. It may come as a surprise, but a lot of lenders are actually willing to work with you and accept your offer for an extension.
2. Get a cash advance from your employer. If your financial need is what one might call an emergency, try to talk to your employer and see if you can avail for a cash advance on your salary. The good thing about this alternative is that it's not really a loan by nature because it's your money in the first place - but you're just getting it a bit sooner than you normally should. This option also is essentially cheaper than a payday loan because, since it's not a loan, it has no interest.
3. Borrow from your savings account. If you have an emergency fund or a secured savings account, try to consider tapping into it. If you don't have one, then it might be time to have one just in case you get another financial turmoil in the future. Starting with a small amount per week can unexpectedly be very helpful and becomes a lifesaver when financial troubles come.
4. Consider a credit union loan. If you happen to be a member of a credit union, try to talk to whomever is in charge with the finances and try to ask if they offer short-term emergency loans to aide members with emergency financial needs. Because these credit unions are focused on the helping members, credit union usually offer lower interest loans that will become more affordable as compared to others -not to mention a more flexible approval rate.
5. Borrow from a friend or a relative. But let me warn you first, be careful of this alternative. If a friend or relative is willing to lend you an amount, make it a point to repay them as soon as possible. A lot of relationships have been ruined because of unpaid debts, and it's something you don't want to get yourself into.
6. Consider Consumer Credit Counseling. If you feel like your financial situation is out of control, considering credit counseling. Come up with a realistic budget make a deal with your creditors on your behalf to negotiate lower monthly payments and interest rates. It's highly essential to make sure you're working with a credible and legitimate counseling service and not a fly-by scam that will just take advantage of your situation.
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