Payday Loan Lowdown

Payday loans are short-term loans issued against next payday. If you wish to avail that, will you be able to avail that? Sounds silly to you but there lies the flick. Lenders are smart, especially those who are dealing in payday loans. Since the interest rate on such loans is usually high, lenders tick for those who are high in debt or have a history of using high-risk lenders. They go by some conditions to make you qualify for lends.

For you have to have a job or receive a regular income and make at least $1000 per month. Then you have to write personal check to lenders for the amount to be borrowed and also, add a specific fee. The cost of payday loans varies from company to company and hence the criteria changes with changing hands. The good thing is that there is no dearth of payday loan lenders and you can approach them online too. At the end, you have to be eligible and the key lies with the lenders.

Online business is a real tricky one. If you know the trick, good but if you don’t then landing on troubled waters could be your fate. Pay day loan sites have increased like any other. So what’s the big deal….we do want options, don’t we? But the caution thrown in by the Consumer Federation of America (CFA) to consumers is something we need to heed. The federation has warned that accessing Internet payday loan sites, where loans due by the next payday can cost up to $30 per $100 borrowed and borrowers can typically face annual interest rates (APRs) of 650%.

Through these websites customers borrow money by transmitting personal financial information via Internet. The CFA survey states that about a hundred Internet payday loan sites for small loans involving electronic access to consumers’ checking accounts pose high risks to consumers.

The survey suggested that many lenders renew loans automatically, thereby withdrawing the finance charge from the consumer’s checking account every payday. This might be reason enough for many people to stay away from Payday loan for a long time to come.

Let me warn you right off that this solution to avoiding payday loans will work only if you believe in it and agree to follow the rules judiciously. Most people just scoff at the idea and don’t even bother to try it out. So, if you really want to know the benefits of this method, then you just have to try it out. It’s called piggybanking. Simply put, it’s trying to save money using the age-old method that children employ to save. All you need to do is invest a little money in a good piggybank. Try buying one of those with a lock and key. That way, even if you are tempted to take the money, you will be able to desist from that urge. If you are still with me, then let’s take up the rules.

This system requires a little discipline of you. You have to maintain a bank, so you need ledgers and make entries in it regularly. You have to note how much money you have put into the bank, and in case you withdraw, write down the exact amount and also try to return the money at the earliest possible.

It is all fine and good to sermonize about saving money and keeping it for a rainy day. But how many of us are actually capable of doing something like that? Very few. And the number of people who are unable to make ends meet, is increasing. Rising gasoline prices, job layoffs, increasing insurance rates, high student loan interest rates… our finances are already stretched taut. So imagine what will happen if your car breaks down — where will you get the spare cash to pay to correct such a simple problem?

It’s never the big things that bring us down. At the cost of sounding a bit dramatic — all it takes is a little pebble to destroy a space shuttle when it is in outer space (Bet you didn’t know that one). Well to get back to where I was, if a small, unexpected expenditure threatens to throw your monthly plan out of gear, you need help to get back on track quickly. And that’s where a payday loan works.

Irrespective of the many names that have been attributed to them, payday loans survive and thrive because of their immense popularity. Their popularity stems from the fact that they are easily and quickly available to the person in need. You may just have been put in the unenviable position of unexpectedly needing some cash and being “caught short”. You might have had an unexpected medical bill or car repair bill, or you might have to travel unexpectedly, like in the case of a death in the family. Others who need quick cash use it to pay their everyday expenses, like rent, groceries, utilities, etc. Whatever the reason, you need that cash and you just don’t have it. So, what do you do? Walk into the nearest payday loan center, complete the formalities and walk out with the money you require. Simple!

Advance America proves that payday lenders are not ones to give up without a good fight. The payday lender recently resumed operations in Pennsylvania, three months after state and federal officials pressured it to stop a loan program that critics said charged exorbitant interest rates. Chron.com reports:

The Spartanburg, S.C.-based company has designed a new type of short-term loan that it says is legal under Pennsylvania law. Its new "Choice" line of credit allows borrowers up to $500 a month for a $150 participation fee. Customers must also pay interest, finance charges and minimum monthly payments of $20.

Read more: Advance America Resumes Pa. Operations

Kansas is witnessing a payday poplosion — these centers are popping up all over the place and the authorities seem to be having their hands full with them. And one of the most immediate consequences of this sudden rise is the steep hike in the number of people who are facing financial problems thanks to payday loans. That’s because the loans have high interest rates, which makes it tough, sometimes impossible, for borrowers to fully replay the loan when it’s due.

However, people working in the payday loan industry don’t see it as an evil that needs to be eradicated. They say that these loans are most often used by people with legitimate emergencies, like needed medicine for a sick child or necessary car repairs. They claim that taking a payday loan is better than the only other alternative available to people — writing a bad check. This would mean facing an even more severe penalty from their bank. 49abcnews.com reports:

But over at Consumer Credit, the counselors hold out hope that people will educate themselves on the perils of payday loans and have a back up plan for those last minute money emergencies.

Read more: Benefits, consequences associated with payday loans

Payday loans are a difficult proposition with people in financial difficulties. You cannot do without them and yet, you’d rather be without their cutthroat rates. So how do you reconcile to this situation? If you live in Hampton Virginia, then you could probably check this option out. News has it that the $1 billion Langley Federal Credit Union, based in Hampton Virginia, recently developed a low-cost payday loan alternative. This alternative is supposed to have netted its members over $230,000 in savings, according to the Credit Union Times.

Called QuickCash, this alternative offers members emergency loans at a fraction of the cost of a traditional payday loan. So, if a two week loan of $500 from a traditional padyay lender costs you more than $75 to borrow, QuickCash, offers the same product at just 18%, or a little over $3.00 for the same loan. Langley FCU uses a common bond field of membership, offering this product to specific businesses, organizations and associations in the Hampton area.

The names are varied and interesting but at the end of the day, all these payday loan stores are similar in one aspect — they try to squeeze you dry of your last dollar. According to national consumer group ACORN, a vast majority of these stores are placed in minority communities, preying on the poor and elderly and dragging low-income wage earners and people who rely on monthly government assistance into deeper debt cycles. Businessreport.com reports:

Beth Butler, an ACORN community organizer in Louisiana, says she recently attended a meeting of the group’s national officials, and payday lending was a hot topic. She says ACORN has supported legislation at the local, state and national levels with the goal of limiting the growth of what she calls "predatory lenders." "They fight us tooth and nail," Butler says. "Some of these payday lenders are owned by major banks. So the big financial institutions are lined up against us."

Read more:The loan peddlers

You’ve heard a lot in favor and against payday loans. But what exactly are these loans and how can you use them. Here is a simple lowdown on payday loans for the uninitiated.

Payday loans are short-term loans for employed people. This helps employed people to tide over difficult situations where they need money immediately and cannot wait till their salary is due. These loans are very convenient and handy, but have one small problem — a high interest rate. Interests on payday loans have been known to cross the 500% mark!

The good thing about payday loans is that you don’t have to wait for a credit check by the company. A payday lender doesn’t need to know your credit history and they will not bother to ask you for it. While payday loan companies differ in the information that is required, most of them ask for the following information when you apply for a loan: Proof of employment, proof of a checking account, last bank statement, social security and driver’s license numbers, and proof of residency.

To apply for a payday loan, you only have to give your lender a personal check for the amount borrowed plus a fee. This check is cashed on a future specified date. And how do you get the amount? Once the company approves your payday loan, the amount is deposited into your account. This is done pretty quickly, usually by the next business day. If you cannot repay your payday loans on the date specified, you can extend the loan period. You will only have to pay an additional fee.

It’s payday loan payback time in Canada as the Conservative government is preparing to introduce legislation that would finally rein in Canada’s mushrooming payday loan industry, delegating power to the provinces to regulate the business and protect consumers. And guess what, the payday loan industry itself is lobbying to be regulated in order to eliminate bad apples while allowing reasonable short-term rates. Canada.com reports:

The bill would address concerns that payday lenders are charging consumers exorbitant rates of interest on small loans - sometimes in the tens of thousands of per cent interest.

Read more:Federal government to introduce legislation on hot payday loan issue