Be Wary of Short-Term Loans

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[The following is a guest post about the dangers of short-term loans.]

If you are facing a financial crisis, a payday loan may seem like the perfect solution to your problem. They usually offer to provide you with instant cash that may be in your bank account in just a matter of hours. They also promote the fact that they will lend to anyone with a steady job, even if you have no credit, or poor credit.

While this may seem like the answer to your financial problems, there are some things you should know about payday loans before making your final decision. Otherwise, what may seem like the perfect solution, may only add to your financial problems.

Payday Loans

How Short-term/Payday Loans Work

A payday loan company is likely to offer you a loan of up to $2,000 that you can spend on anything you want to. Through this loan contract, you agree to make regular payments to the lender until your loan is paid in full. They will attach various fees to your loan that you must also pay back in full. The application process is very easy and these companies do not do any type of credit check to see if you qualify for approval. As long as you have a steady income, you will probably be approved.

You may ask yourself why payday loan companies offer loans to people with little or poor credit when other lenders will not. This is because they set up an agreement with you where they are practically guaranteed to get their money back. This is because you agree to allow the payday loan company to withdraw the fund directly from your regular pay check or your bank account. These funds will then be directly forwarded to the payday loan company.

Repayments

It is very important that you realize the when you agree to a payday loan, you are authorizing the company to take funds directly from your pay check or bank account to cover your debt. Once you make the agreement, these payments will be automatic and there will be nothing you can do to stop the payments. This means that you will have fewer funds available to you every week until the loan is paid off.

If you are having the money directly deducted from your bank account and you do not have sufficient funds available, you are likely to receive an additional fee from your bank.

Added Fees

While the government has set some strict guidelines in place for payday loans, you will still repay a substantial amount more than you initially borrowed. Right from the start you will be charged a 20% establishment fee just for taking the loan out.  If you are taking out a $2,000 loan, the establishment fee would be $400. You will also pay a 4% monthly account fee on the balance you still owe. This will add up to a lot of extra charges.

For example, if you obtain a loan for $2,000 and plan to repay the loan over 16 biweekly installments, you will owe $190 every two weeks. This will equate to a total repayment of $3.040.00, which means you will be paying more than $1,000 more on a $2,000 loan. This does not even include late fees if you are ever late with one or more payment.

Alternatives To Expensive Short-term Loans

There are several alternatives to payday loans that you may want to consider. You definitely want to contact your lenders first and see if you can make alternative payment arrangements with them, so you do not have to take out a loan. You may also be able to borrow a small amount from a friend or family member and pay it back over a set period of time.

There are also some other loan alternatives, such as a standard bank loan or you may be able to obtain a low-interest credit card that you can use for some of your expenses. If you are low-income you may be eligible for specialty or Centrelink loans from bank and charity partnerships, such as the StepUp Loan and the No Interest Loans Scheme. If you receive payments from Centrelink, you may be eligible for an advance payment to help offset some of your current bills.

While taking out a payday loan may seem like a good idea initially, keep in mind how much you will need to repay in added fees. If you are not careful, this type of loan can actually add more financial stress on you than you currently have. This is because you will have to go with several weeks or months of decreased pay checks to cover all of your other expenses.

If you do obtain a payday loan make sure you read the contract through completely and that you are certain you will have the ability to repay the loan.

5 Points You Should Consider When Looking For A Reputable Payday Loan Company

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[The following is a guest post on behalf of Check ‘n Go]

The payday loan industry has been a very fast growing, yet controversial, industry over the past few years. With state level legislation frequently changing, it can be difficult to be sure you’re choosing a reputable payday loan company. If you’re a consumer of this fickle industry, it’s important to do business with a reputable lender. These 5 points are surefire ways to know you’re dealing with a credible payday loan company, especially when buying online.

5 Signs Of A Reputable Payday Loan Company

[Khaleef’s note: These items are not a guarantee that you will find a reputable payday loan company, but they can help you weed out a lot of bad ones!]

Look For Logos:

When visiting a payday lenders site, look for credible logos. One such logo is the Community Financial Services of Association of America. This is your best source for responsible lending practices, as well as pertinent information about the payday loan industry as a whole. If a site displays this logo, you can be assured they’re a reputable brand.

Also, look for a secure transaction logo, such as VeriSign, or other reputable authentication service logos. This will ensure that your account information will not be compromised when purchasing a loan online.

A Reputable Payday Loan Company Will Have Knowledge of State Laws:

A legitimate payday loan lender will have knowledge of payday loan laws as they vary by state. Legislation pertaining to payday loans is always changing as it is a hotly debated topic. A reputable lender will keep up with this information by updating and informing the customer as necessary.

Frequently Asked Questions And Information:

A reputable payday loan lender will be very knowledgeable about payday loans and other related services; they will have all the important information, should you have any questions about their services, or debt and bankruptcy matters!

A Physical Location:

Most of the top trusted payday loan lenders have locations online and off. Retail locations were the initial source of payday loan lending, but because many have become internet savvy, there is an online option for this market.  While online payday loans may be appropriate for some, not everyone trusts or prefers them. Having a physical location builds trust and offers relief to customers who are skeptical of online transactions.

Offers Additional Services:

An experienced payday loan company knows that their customers have needs that extend beyond a payday loan.  That’s why you’ll find that the most reputable payday loan companies will offer additional services, such as cash checking, title loans, installment loans, and even money transfer services. The less experienced payday lenders will focus exclusively on the payday loan, and aren’t as aware of their consumer base and needs.

Because payday loans are sometimes a quick answer to difficult financial answers, there have been many payday loan lenders, especially online, that have evolved to take advantage of peoples misfortunes. These cases often end up turning into fraud, or other non-friendly consumer experiences. To eliminate this, consider a reputable payday lender that you can trust.

This blog post is provided by Check ‘n Go, a trusted online payday loans and cash solution installment loans company. Check ‘n Go is the fourth largest consumer financial service institution offering check cashing and online payday loans in the United States. A founding member of the Consumer Financial Services Association (CFSA), Check ‘n Go has always been committed to responsible lending and continually works with legislators to improve the credibility of the cash advance industry.

photo by vichie81

Stewardship of Resources Can Include Smart Payday Loan Borrowing

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[The following is a sponsored post on behalf of The Payday Place. To be honest, I do not have the hatred of a payday loan that many personal finance writers have. I think that it can be a tool for people who are in certain financial situations.]

We are all given many talents that should translate into how we take care of ourselves, our households and our communities. Some of those talents include the things we do to earn a living. Other talents include our capacity for managing those earnings. A cash advance loan, handled correctly and at the right time, can be part of wise stewardship.

Payday Loans As A Financial Tool?

How so? The idea of a payday loan cash advance is to navigate the challenge of timing. Say you had an unexpected or emergency expense shortly after your last payday. Something as simple as a car repair – necessary for managing family matters as well as getting to and from work, for many of us – can drain your bank account before your bills are paid for the month.

If you do not have a credit card or other line of credit to accommodate that expense, or if borrowing through that card would come at very high interest rates, you would need to find the money elsewhere. [editor’s note: This is one of the main reasons why you need an emergency fund]

An Early Payday Solution

A payday loan can often provide the cash advance you need to take care of paying your bills and your car repairs or other emergencies. In effect, you are borrowing from yourself.

Are these easy to get? And importantly, can they create a less-than-optimal solution?

A paycheck advance loan is relatively simple to get online. And if you shop around, or use a payday loan aggregator service (for example, The Payday Place), you should be able to find the lender that provides the best loan terms for your situation.

If you worry about borrowing when finances are tight, the most important question is how well can you manage yourself and your expenses over the next four to six weeks? Can you reduce expenses in the future, to allow yourself to catch up and keep bills paid in the pay period to follow? After all, a cash advance loan on a paycheck is borrowing from the next pay period.

[editor’s note…again: I think this is a great piece of advice, and it causes you to be extremely careful if you ever find yourself in a situation like this.]

Give it prayerful consideration. If you fully understand the terms of the loan, then you will know how to pay it back. After all, a very important part of stewardship is to use your brain as among your most valuable talents.

photo by rinkjustice