Payday Loan Lowdown

–By Priya Jestin, Staff Writer

It’s the holiday season, a time to celebrate and forget our woes for a while. So, what better way to celebrate than buy a few gifts for your loved ones? And if you are strapped for cash, just go online and click onto the sites of one of the many online payday loan companies.

Yes, we’ve all heard the blah on payday loans and yes we know they are bad. And so is alcohol and cigarettes and… the list goes on. Well, anything that’s taken in limits cannot hurt — not even payday loans. Getting back to payday loans, I recently noticed the surge in their numbers. Cyberspace seems to have provided very fertile ground for payday lenders. It is much easier for consumers to now buy the gifts in time. While they do have their benefits, do be careful and ensure that you are aware of the risks when you take a payday loan.

Payday loan companies help you tide over immediate crises by giving you cash. But a payday loan is not a gift from Santa. It’s a business deal that favors the lender and you must be careful to repay the amount in full on the due date to avoid falling into a debt trap. It is important for you to follow a few simple tips if you want to have a good payday loan experience.

First of all, you must verify the authenticity and reputation of the online vendor. If they don’t provide proper information on the interest rates charged, then you better find yourself another lender. Also try to shop around before you settle for a loan. You may spend more time, but could end up with a better option.

Don’t forget to read the fine print. Read and reread the terms and conditions before you accept them. And finally, don’t forget to repay the loan within the specified period. This will save you a lot of heartache because some payday loan companies have been known to charge as high as 700% as interest!

If you have a credit card and have defaulted on the payment, you will know that a typical payday loan is more expensive than a credit card late fee. And yet people queue up to get money from businesses that are out to squeeze them dry of their last dollar.

If you are faced with a serious debt problem, the best thing you could do is speak with your creditors. Quite a few creditors agree to negotiate partial payments if a payment plan is in place. And if you are in serious trouble, there are the credit counseling agencies that can help you work out a debt repayment plan with your creditors.

Can you live within your means? This question probably sounds dumb but believe me, it is very pertinent today. If you and your neighbor are equal in every manner — you earn the same amount as salary, have the same family size and a similar home, then how do your expenses vary? Ideally, all things being equal, the expenses of two very similar families should also be the same. But reality is anything but that. It has been found that on an average, most people live above their means.

People don’t seem to realize that they are regularly spending more than they earn and thereby creating a situation, which will eventually degenerate into heavy debt and this is where payday loans come into the picture. You are unable to meet your day-to-day requirements and are lured into taking a payday loan to meet your immediate needs. If you fall into this category of people, then the first thing you need to do is admit to yourself that you are facing a serious problem. Next, try to find ways to manage your expenses and control your debt. I will come back with a few tips to control your expenses soon.

Show me one man who has been dragged unwillingly into a payday loan center, forced to sign a check and take the money that is offered to him. The authorities want to play the good guys and so have come out in full force against payday lenders. But there is one simple fact that they overlooked. No payday lender has badgered people to come to them and use their services. Payday lending does not involve shoving money down the pockets of unwilling people.

Only those people who need money urgently and have a regular job, through which they can repay the loan, are eligible for a payday loan. Of course there are people who find it difficult to repay their loans and fall into a debt trap. But that involves a deeper malaise — one of free spending without proper saving education. So when the authorities are trying to oust payday loan centers, they are trying to cure the symptoms of the problem and not its root cause. What is the need of the hour is to educate people on how to spend within their means and save some for a rainy day. Once that is done, payday loans will not seem like a big problem.

Fine, our wages don’t carry us through the month and as expenses rise, it has become increasingly difficult to make ends meet. To top it your mortgage loan may be squeezing you dry while you attempt to help your child pay his/ her college fees. Yes, times are bad. But does that mean we let go of ourselves and borrow left, right and center with no thought of the future? Well, if you thought this is going to be another sermonizing session, think again. While surfing online I stumbled on some frugal living tips. While some of them are way too much, there are others that sounded fine to me. I especially liked the tips on buying gifts cheap — gift giving is a national malady in our country and we can go to any extent to spread the holiday cheer—even lose all our savings in the bargain. So I think all of us could do with some tips since the great gift-giving season is just a few months away, I thought I’d share some of these tips with you.

Go Out Of Your Way: Try shopping in places you wouldn’t normally go to. For instance, you could find real gems at second hand stores, garage sales and flea markets for very little cash. Don’t worry about the fact that you’ve bought it at such places — remember that worth, just like beauty, is in the eye of the beholder.

Go online: Have you ever tried to buy something at online auctions and bargain places? Keep an eye on them throughout the year and you are sure to find some really superb bargains. A word of caution here: It’s easy to get carried away at an auction, so concentrate on gifts and nothing more or you’ll end up losing all your money.

Make them: You have a skill like knitting or carpentry… etc, put it to good use. You could make so many things like afghans, wooden toys, quilts, socks, blown glass ornaments, furniture, wrought iron fireplace tools… whatever you can do, do it.

A recent survey shows that most Americans know that their finances are in a mess and that they plan to repay their debts at the earliest possible. But many of them are still clueless about how they plan to go about such lofty ideals. I mean, one fine day you do decide to repay your bills but don’t have enough money, so what do you do? Walk into the nearest payday loan store, borrow money and repay another loan. Crazy? You bet. One of the biggest problems Americans face is that they refuse to plan their financial strategy. Most of them operate spontaneously. You suddenly decide that you want to save some money, and put aside whatever you can manage to keep from spending. While this may technically be called saving, you know very well that you are only cheating yourself.

What you need is a concrete plan that will make you save a particular amount of money every month. A plan that is tailored to your requirements so you can stick to it even under pressure. Given below is the first step that will take you closer to the gates of debt freedom.

Examine expenses: The only way you can even begin to analyze the problem is by minutely examining your expenses. And don’t cheat. You cannot check the expenses for one month and then decide that the same holds true for the entire year. So the first thing you need to do is itemize all the statements, bills payable, loans and other payables for the past year.

Now, add up the numbers and see if your expenses outweigh your income. If yes, then you are in trouble and need to do something immediately. Here’s where you need to do some soul searching. Separate the expenses that are necessary and the ones that you can do away with. This will show you what expenses you could have avoided. Now use these figures to create a budget for yourself. Be realistic and don’t create a budget that is so austere that you find it difficult to adhere to.

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.

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.

Many American families are today living paycheck to paycheck — a very dangerous situation to be in because the smallest problem can mean you are short on money and are forced to depend on other sources like payday loans. One of the many problems with these types of loans is that until you can break the cycle of borrowing, repaying and borrowing again, you never really catch up. Azstarnet.com reports:

Contact a reputable credit counseling organization, and it will help you by putting together a spending plan that will allow you to finally break the payday-loan circle. You might start by contacting a member of the Association of Independent Consumer Credit Counseling Agencies or the National Foundation for Credit Counseling.

Read more: There are ways to climb out of your payday-loan hole