Articles on Loans | Topics: loans, loan, loaning
by David Foreman
For those that may be short on cash before their paycheck comes in, there are several places that offer payday loans. These are sometimes referred to as cash advance loans or fast cash. Most of these places offer fast and easy ways to get cash until your next payday. There are several places you can go, including the internet and specialized businesses, who offer a small amount of money to be used from one to four weeks.
The policies that payday loan companies have seem like an easy way to get rid of bounced checks, late payments or bad credit. Most offer the loan even if you have a bad credit report, no credit at all, or are bankrupt. As long as you are making a certain amount of money monthly, you can qualify for a payday loan.
The problem with payday loans is that if you decide to borrow money up until your next payday, you will end up with a very high interest rate to pay back. Most of the loan companies will say that this is because you are only borrowing the money for a short time. However, the interest rate for one loan usually averages at 300% APR. Because of this, you will end up paying more interest on your loan than you will actually paying back the money that you borrowed to begin with. This starts a viscous cycle of always owing money to the payday loan companies. Many will often have to extend the loan from the money that they borrowed, causing them to go more in debt than they were when they went to the loan company.
When one goes in to a company to get a payday loan, they are required to provide the loan lenders with proof of employment and write a postdated check for the amount that you are borrowing and the lender fee. The fee itself will not be that high, but the interest rates will. If you don't pay the interest rates, the loan company will have all of your information, which will give them permission to call you or your company if you have any outstanding payments to make.
If you have already borrowed money from a payday company and are caught in this cycle, there are a few ways to get out. Many will call the loan company and tell them that they can not pay the certain amount owed by that time. It is also an option to stop payments to the loan company. This will help for you to get out of debt in other areas that are more important to keep a good credit record.
| Bit of History |
The private citizen, beset by partisan appeals for the loan of his Public Opinion, will soon see, perhaps, that these appeals are not a compliment to his intelligence, but an imposition on his good nature and an insult to his sense of evidence.
| —Walter Lippmann (1889–1974) |
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If you are in need of borrowing money for a short period of time, there are other ways to proceed which will not get you in a bind later on. The first way is to contact a credit union for a small loan. Usually, credit unions offer smaller loans with the same policies as payday loan companies. The difference is that the APR on their loans are around 15%, making it possible to pay off. There is also the option to go to a credit union where you already have an account and borrow from your own account. When you do this, it is an even lower APR and you will earn dividends on your savings when you pay back the loan.
A second way to avoid fast cash lenders is to use a credit card advance. By doing this, you can take money out of your credit card and pay it back at a later date. The APR with doing this will be higher than normal, an average of 20-25%. It is best to do this only if you have a good credit score rating, so that your credit record doesn't look bad if you ever need loans again. This is especially important if you don't think you can pay everything back by the next payday.
A third way in which you can avoid payday loans is by using the resources that are already available. Several banks have overdraft protection available. If you write a check without having the money in the account, it will give you an automatic loan which you can then pay back over time. It may also be effective to talk to the creditors or the place where the bill is coming from. Many will have a grace period time that they can offer, and if you let them know that you are short on cash, they are more likely to be flexible with the amount that you owe.
While fast cash and payday lenders may seem like a quick and easy way out so that you have money for a short amount of time, the repercussions can become much more problematic than the borrowing of the money was to begin with. Because of the high interest rate and the permission given to the company to contact you, it is better to find another route to borrow money.
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Please note: All personal opinions expressed in the "Payday Loans REALLY Make You Pay in the End!" article belong to the contributing author and are not necessarily shared by LoansCreditConsolidation.com. |
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