Payday Loan Lowdown

Most people who fall into a payday loan trap are there mainly because they are unable to keep their finances under control. Agreed, sometimes emergencies do arise and you need money immediately. But that’s exactly the point — that we don’t have money when we need it most. So what can you do to ensure that you do have money when you need it most? Penny –pinch. Yes, it isn’t such a bad thing, and it’s something that was taken for granted a few generations back. It’s only today that we need to buy everything off the supermarket shelf. But if we honestly sit down and try to see where we can cut our expenses, we’ll see that there are quite a few expenses that can be trimmed away.

One of the biggest money savers is your house and car. Keep your present and future earning potential in mind when you purchase a home or vehicle. It’s all well to want that SUV, but see if your finances can handle these gas-guzzling behemoths before you go in for one. Once you’ve worked around the big expenses, you can start maximizing your saving effectiveness by starting to save on some of the smaller expenses.

Look around your home and take inventory of items that you paid too much for, items you purchased that you didn’t really need, and maybe even broken or non-functioning items which are costing you money in repairs or upkeep. Make an inventory of these items and see if you can dispose them — a garage sale maybe. Then there are the simpler tips, ones that may not save you a lot of money at one go, but by diligently saving over a period of time, you could have a neat little nest egg.

In a bid to ensure that the industry doesn’t earn a bad name, a few payday lenders in Michigan have come forth to ensure that a set of state regulations came into effect. According to industry sources, a few payday lenders who were charging exorbitant rates ensured that the entire industry got a bad name. Mlive.com reports:

The legislation allows loans to have annual interest rates of up to 375 percent on a $250 loan, plus various fees. It also limits the number and amount of loans a consumer can take out and forbids threats of criminal prosecution against people who fail to pay.

Read more: New rules police ‘cash to go’ lenders

A recent report on predatory lending by the Department of Defense provides evidence that there is a high concentration of payday loan outlets at the entrances of military bases around the country. According to the report, military personnel are several times more likely to use payday loan outlets than other segments of the population. Rtohq.org reports:

"Predatory lending undermines military readiness, harms the morale of troops and their families, and adds to the cost of fielding an all volunteer fighting force. Education, counseling, assistance from aid societies, and sound alternatives are necessary but not sufficient to protect service members from predatory lending practices or products that are aggressively marketed to consumers in general and to military personnel directly."

Read more: Department of Defense report on predatory lending includes rent-to-own

Some people suggest that the solution to payday loan problems lies in banning them. Can it be that easy? I believe that if we totally stop payday loan companies from operating, it would be akin to throwing the baby out with the bathwater. Agreed the system in its present form is far from beneficial to people. The only people who make money are the owners of these centers. But with a little fiddling and tightening of the rules, payday loans could become a blessing.

One of the first things that need to be done is lower the interest rates –a considerable amount of lowering will be required to make payday loans a long-term financially viable option. The next thing that needs to be done is educate the people about the true benefits of payday loans. Yes, you heard me right there. Payday loans are not very good in the long term, but they do have their benefits. One of the biggest plus point is that it allows people to have a little extra money in an emergency. But it is important that you don’t begin to rely on these loans too much or they will harm you.

Payday loan companies are howling now that they’ve been hit where it hurts. The lawyer of A-OK, a Canadian payday loan company, which was recently in the eye of a storm, is complaining that the firm is being “unfairly targeted”. Vicnews.com reports:

However, Michael Thompson of the Canadian Payday Loan Association criticized Justice Brown for jumping the gun just as the federal government was preparing to pass new laws. "I don’t think it is a precedent-setting case. The law on which the judge based her decision will soon be invalidated," he said.

Read more: Payday loan companies subject of class-action

QC Holdings Inc., a payday loan company recently announced that its board of directors has increased the company’s common stock repurchase program to $30 million. During August, QC said it repurchased 850,000 shares of its common stock for approximately $10.3 million. Kansascity.com reports:

The program, which recently was extended to June 30, 2007, would have been completed upon reaching $20 million.

Read more: OP payday loan company boosts stock buyback to $30 million

We cringe when we think of repressed societies where decisions are made for people. We cringe when we think of others pressuring us to do things against our will “for the sake of our own good.”

We believe in free choice — and a free world where everyone can live as they please, and do what they wish. That is ideal for human beings, isn’t it?

Why, then, do we constantly end up making choices that are bad for us? History is witness to the fact that — time and again — when people have complete freedom of choice, they choose that which is not good for them — that which eventually destroys them.

Look at the greatest preoccupation of America, for instance — dieting. We are obsessed with our weight, and yet we are an obese nation — the fattest nation in the world today!

The humble television that was once a useful medium for news updates and the occasional movie has now attained giant proportions with its 24 X 7 availability causing people to become TV addicts and even alienate themselves from loved ones.

The freedom to spend money that we don’t yet have (payday loans, for instance) is causing us to go overboard spending lavishly, and ending up in a vicious debt cycle.

We smoke too much, we drink too much alcohol and coffee, we indulge in unsafe sex with multiple partners? all the paths that lead to the hospital (and later the grave) — all in the name of free choice.

So, now, is free choice good for the human being?

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Whether we like it or not, payday loans are a reflection of what is happening to our society today. These loans have been criticized ad nauseam — but are they really all bad? Let’s take a look at the arguments in favor of Payday Loans:

These loans are available for unforeseen emergency situations when you desperately need quick cash. Situations where people seek payday loans include unexpected medical bills, car repair bills, unexpected travel, or a death in the family.

The benefits of payday loans:

• There is no credit check involved.
• Payday loans, or cash advances, are extremely fast.
• The application process usually takes only a few minutes, consisting of simple fill in fields including your bank account information.
• Applications can be made in person, on the phone or on the Internet.
• The process takes less than 20 minutes.
• After submitting the application, the approval process begins, and is usually instant or only takes a few seconds.
• The majority of applicants are approved instantly and collect get their cash within hours.
• The loan amount is automatically deposited into your bank account within 24 hours.
• No up-front costs are involved.
• You don’t need to involve other people (discreet).
• Your financial information is not shared with others.
• Personal payday loans are available to almost everyone.
• Bad credit does not disqualify you.

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Can there be a permanent alternative to payday loans? Something that allows you easy access to money with low or no interest and doesn’t force you into a debt-dance? Actually, there is. The good news is that it is easily accessible to all of us, but the bad news is that if we haven’t had some initial training in it, then the process may be a bit difficult. Sounds intriguing? Well, it’s called good old saving.

Don’t scoff it off yet. Agreed in our culture spending is the big thing today. People learn the joys of spending early on and credit card companies and loan issuers fortify us with ready cash so we can satiate our hunger to spend.

But then at the end of it all, when the bills pile up, each one of these false friends leave us to fend for ourselves. And the worst of the lot is the payday lender. They offer you money, hard cash and you can satisfy your immediate need. But God forbid if you cannot repay the money within the stipulated period.

Now imagine a scenario where you teach yourself, and your family members to save. Not too much, just enough so you don’t feel the pinch. Make it compulsory and regular. Every week or month, you just have to put aside a certain amount, it could be something as small as $10. The hitch is you shouldn’t touch it. Only under extraordinary circumstances can you open this piggy bank of yours and withdraw that money.

The process is like dieting — the first few days are extremely difficult. But once you’ve got the hang of it, well, it’s a breeze. And the next time you are in an emergency and require cash, you can become your own lender!

Now that you are being badgered by state governments that insist payday loans are bad, most people begin wondering if it is really true. If so many people say so, then it must be a bad thing, right? Wrong. It is simply a matter of how you use a payday loan and more importantly, how you repay it. Payday loans, especially the online variety make money available when you need it fast. Imagine if you are in bad need of a relatively small amount of money. Will you apply for a loan, go through cumbersome and time-consuming paperwork and then wait endlessly for the loan amount to show up?

Or would you rather opt for a payday loan wherein you get your money without any surety other than your salary? Of course, payday lenders are no saints, and there are many unscrupulous ones that are out to drain you of your last cent. Some have even been known to charge as much as 600% as interest! But this again should not deter you from making use of what is essentially a beneficial service.

There are many small tricks that you can use to avoid being cheated and turn the online payday loan service to your advantage: If a website is vague about the interest rates, fees — both late and penalty or hide them totally, don’t deal with the company. Payday advance lenders are required by law to provide all this information and if any website doesn’t, then it is doing business illegally. Officially speaking, a payday loan is a short-term cash advance to help you through a tight situation. You are supposed to pay back asap.

But most lenders allow you to stretch the loan payback date. This is not out of any goodwill — the company can then charge you exorbitant interest rates and you will not know what hit you. So it is in your best interests to either repay the loan within the loan period, and if not, find out exactly how much a late repayment will cost you in real terms.