Money is difficult to live without, and it rules us, spurs us on to do things, and it is the one thing everybody seems to want more of. Nevertheless, for a lot of people, barley having enough money is a weekly occurrence, and this means that they are struggling to pay their bills or to put food on the tables. Due to the global financial mess, it seems as though everyone except the very wealthy, has to make cutbacks.
Therefore, it should come as no great surprise that more people than ever before are discovering that their paychecks are not covering their bills, be it grocery bills or energy bills. Typically, there are times when some people may have to spend several days without any money, and with little food in the cupboards. It is at times like these, that the desperate are turning to acquiring loans that will help them to pay for basics, such as light, heat, food and even the costs of travelling to and from work.
The help they seek is typically in the form of a loan with a short repayment time span, and these are known as payday loans, salary check advances or quick cash loans. They are typically available on the internet. Some of the larger payday lending companies also have stores situated in most towns and cities. You might have seen them in your area recently, as the demand for these types of financial products become higher.
The Problem With Payday Loans
Despite the advantages of the speediness of this type of loan, there is a big problem. That problem comes in the form of sky-high fees, charges and interest that most of these lenders add on to the amount you asked to borrow. This is for the reason that these loans are targeted at people that are either on low incomes, or who have a poor credit history, making it nearly impossible for them to secure a loan from their bank or other lenders.
So if you find yourself in a situation where you are thinking about taking on a payday loan, then here are some of the things that you need to think about, prior to signing on the dotted line.
Ask Yourself If This Kind Of Financial Product Is Right For You
Getting a payday loan can leave you with a lot of money to pay back, and this is something that you are likely to have to face, the next time you receive your wages. This is due to the fact that you are not just paying back the amount you borrowed, but also the high rates of interest and fees on top. This could leave you with the prospect of paying back almost twice the amount you asked for in the first place.
“The typical person who takes out a payday loan is an individual who has not built an emergency fund for themselves and is finding themselves with emergency (or pseudo-emergency) expenses that exceed their current funds. The prevalence of payday loan businesses make it easy for them to get such loans with little effort, and thus many, many people fall into that high-interest trap (that’s why so many of these businesses can survive and thrive). It’s truly an unfortunate situation, one that thrives on a lack of basic financial education.”
Consider How You Are Going To Repay The Loan
Penalties for failing to make the repayment deadline have a tendency to be severe, and that is why it is important to repay loans on time. So before you apply for this kind of loan, it is crucial that you are fully aware of how and when you are going to pay for the loan, otherwise you are likely to find that you are being contacted by debt collectors.
Make Sure You Have Ruled Nothing Out
Knowing the alternatives to getting a payday loan is something that should only be treated as a last resort. If you are in a jam financially, then there are other ways that could be utilized in order to get yourself back on to your feet. Asking people for financial help might not feel like something that you would do normally, but it can be a successful means of getting cash without the added problem of high interest rates. Credit unions are something that is sometimes overlooked, and that is shame as they can offer people that are customers of theirs, loans that have really low rates of interest.
Avoiding The Debt Trap
A payday loan is something that is advertised as being useful, and if you think that you are going to be able to put the money aside to repay the debt, you should be okay. Remember though that if you underestimate the seriousness of failing to repay, then you could be facing debt collectors at your front door. The problem with borrowing money against your wages is that you will find that you have even less money the next month, and this means you could end up asking for another loan. This is when you become trapped in a debt cycle of borrowing more money to cover the following month’s expenses, and so it goes on.
Getting Into Financial Trouble
One problem associated with a payday check loan is that they can quickly cause financial problems, especially trapping people in a spiral of debt, which is almost impossible to get out of without defaulting on the loan. Normally, you can expect to be offered a sum of money from a payday lender that is no more than half of your normal monthly salary. There are some payday lending companies that do offer more, and those are the ones that you have to be careful of, as they do have the tendency to be more forceful when you miss a payment.
Who Is Eligible For A Payday Loan?
If you are thinking about getting a payday loan, then you need to understand that there are some criteria that you have to meet in order to be eligible. To begin with, you must be over 18 years of age, plus, you need to be earning a certain amount of cash each month, although this figure is dependent on each lending company. Another thing that you need to have is a checking account with one of the main banks, with has a charge card.
What If I Have A Poor Credit History?
There should be no problems with getting one of these loans, even if you have a poor credit score, providing that you meet the criteria listed above. There are a number of payday lending companies that do not even require a check on your credit score, so a poor score is not always a problem.
Are There Any Up Front Costs?
There are no up front fees or costs to pay when you apply for one of these loans, and if you find a lender that wants your money before you apply for a loan with them, go and find another lending company.
Spend The Money However You Like
One of the advantages of this type of loan is that you do not have to tell the lending company what you intend to do with the money. Some loans and banks require you to tell them what the loan is for, such as home improvements, or a new car. With a payday loan, there is no need to tell the lending company about your plans for the money.
How To Get One Of These Financial Products
For the most part, payday loans can be found on the internet, although there are a number of lending companies that are setting up stores in towns and cities across the United States. They have come in for some criticism recently, due to the fact that they seem to always move into poorer neighborhoods.
The Application Process
The process that you will be required to undertake is fast and easy, and this is one thing that makes these types of loan attractive to many people. All you will be required to do is to provide details of your name and address, your bank account details, your charge card details, as well as details of your job and how much you earn. Once you have sent your application to the lending company, you will typically be contacted within minutes with their decision. As soon as you have been accepted for a payday loan, the money could be in your bank account within 60 minutes, the process is that quick.
How Is The Loan Repaid?
Once you have the money, you will, of course, need to pay it back. Note that it is not just a matter of paying back the amount that you borrowed. There is going to be lots of interest and fees to pay on top. The date of repayment is usually set by the date that you get your very next paycheck, and this is where the loan gets its name from. The amount you borrowed, plus the fees and interest, will be taken from your checking account, usually by using the charge card details that you provided at the point of application. Of course if there is no money in the account then you will need to make other arrangements to pay.
The Bottom Line
Before you sign up to a loan such as this, then you really must take a step back and look at the bigger picture. As discussed above, there are a number of pitfalls that need to be avoided in order to escape from the trap of debt and repayment that has a habit of ensnaring even the most prudent of people. If you are not careful, then you could be opening your life up to a whole host of money related problems. As good as these loans can be, and for some people they are a great way to get out of a tough financial situation, there is always going to be a risk, and for some people, that risk could be difficult to handle.