Best
PayDay Loan
There is a general notion
that Payday loans are a quick and easy way to get cash
Payday loans typically are cash advances made in exchange for a post-dated check,
normally dated about two weeks after the date on which the cash advance
is made. Generally, a borrower issues a personal check for
an amount lesser than or equal to $1,500, which is written in
favor of the payday loan company for the amount
that the borrower wishes to borrow.
Different Types of Cash Advance Loans
and Payday Loans:
Generally, a payday loan is requested only
for a short period of time - normally ranging from one
week and not more than four weeks at the most. You are
required to show proof of employment and documentation
to support proper identification; following this, you
are required to write a postdated check for the full
amount that you borrowed in addition to the payday loan
fee, and leave this check with the lender. The fee may
appear to be reasonable and are at times as low as $15
to borrow $100 for two weeks, for instance.
Why You Must Avoid the Payday Loan
Debt Trap
o Attempt to work out a payment
arrangement with the payday loan lender instead of
opting for another payday loan. A few states direct
payday loan lenders to provide extended payment plans
for the benefit of the borrowers. If your lender refuses
to work with you for some reason, you are entitled to
contact your state's Department of Financial
Institutions to mediate and thereby facilitate a fair
resolution.
o It is often common-place for
borrowers to take out a second payday loan in order to
pay the first one; this creates a larger debt trap, so
it is best to try to find an alternative in order to pay
off the first payday loan. Always avoid piling up more
than one payday loan and avoid the first one if
possible.
o Ensure that the check that you
wrote to secure the payday loan does not bounce to avoid
incurring a returned check fees at your bank every time
the check is presented to your bank account and returned
due to insufficient funds. This significantly increases
the amount of money that the initial payday loan would
end up costing you. On the other hand, if you have
authorized the payday lender to withdraw the funds from
your account electronically and you think you would not
have ample funds available, make it a point to write to
the lender revoking that authorization. It is also
necessary to follow this up with a notification to your
bank informing them of the problem and requesting them
to place a stop-payment on the withdrawal. While you
will still be required to repay the loan, at least you
will not be incurring non-sufficient funds fees.
o Read your contract carefully to see
if the fine print includes a voluntary wage assignment
clause, which would mean that you are authorizing the
payday loan lender to access your wages and take money
directly from your paycheck in order to repay the loan.
If your agreement does contain such a clause, it is best
advised to write a letter to the lender requesting to
revoke that agreement.
Who Uses Payday
Loans?
Payday lenders have been seen to target
the following categories of people owing to the higher
chances of succeeding in getting away with their
unreasonable clauses.
o Young consumers with limited
understanding of finances and the implications of
entering into such a Payday loan
agreement
o Consumers who are already way too
deep in debt
o Consumers who are struggling to
meet their every day financial requirements
o People who have a history of mismanaging
finances and therefore using high-risk lenders
Options Other Than Payday
Loans
The United States Federal Trade Commission
has recommended citizens to avoid payday lenders as far
as possible, in their own interest. Instead, they
recommend these alternatives for safer and much less
expensive and hence repayable loans:
o Consider borrowing from family or
friends and get the terms of the loan in writing to make
it clear that you definitely do intend to repay the
loaned sum.
o Local credit unions often come in
handy if the loan amount is small.
o Request for a pay advance from your
employer.
o Request for extension of the due
dates for bill payments as a one off case from your
creditors instead of opting for a payday loan.
o Use a credit card advance if available.
o Consider the facility of overdraft
protection on your bank account so that the bank will
pay the check if you do not have enough funds to cover a
check you write, and thus you will avoid non-sufficient
fund fees and check bounce fees.
o Take the help of credit counseling
for other possible options.
o Most important of all - plan ahead
to prevent financial emergencies.
o Ensure you explore every
possibility before going in for a short term loan of a
pay day loan.
Prevent Financial Emergencies by
Planning Ahead
It always pays to take a close look at
your income and expenses. It is important to keep track
of where your money goes and find ways to save, since it
usually only takes small amounts in a number of
different areas to add up so as to be enough to build a
small savings account that you could fall back on in an
exigency instead of being forced to opt for high
interest rate lenders like pay day loan companies.
Take help, if required to prepare a
budget; ample help is available on the topic from
various sources. Of course, it is best to fall back on
the elders in the family for help with simple steps for
setting up a budget, sample budget worksheets, ideas for
finding ways to cut costs and save money, and more,
since they surely have the wealth of experience.
Best Payday
Loan
Equal Housing Opportunity
(c) Copyright 2006
#1 American Financial
(1AmericanFinancial.com)