You’ve probably heard the advertisements on the radio or seen them on the television or in the newspaper:
Need Cash Until Payday?
Get $500 Deposited into your bank account in Minutes!
No Credit Checks. Bankruptcy OK.
Whether known as “payday loans” or “cash advance loans” or “payroll advance loans”, these are all part of a relatively new type of short-term loan transaction. And they are Hot.
Millions of people are finding themselves short on cash and needing a little help to carry them to their next paycheck. Payday loans may be helpful when you are having temporary cash flow problems or are facing a financial emergency and need money on a short-term basis. An unexpected car or home repair can drain the cash reserve out of an already tight budget. Many of these people need immediate cash to purchase groceries for the family or gas for the car. Payday Loan Companies can deposit money directly into someone’s checking account, usually by the next morning. The speed and ease of these transactions have made payday loans the first choice for millions of people needing short-term cash loans.
How they work.
Most of the payday loans work something like this:
You fill out a 1 or 2 page online form. This can normally be done in just a few minutes.
You provide a postdated check to the lender. This check is held by the lender until your loan payment is due … typically two weeks.
The lender deposits your loan directly into your checking account the next morning.
In two weeks the lender deposits your postdated check, unless you have already repaid the loan or received an extension.
It is really that easy. Typically the only requirements are that you have a job, you have a checking account and you are at least 18 years old.
Not all payday loans are the same.
There are 4 bits of information about your loan that are very important:
Amount Financed: The amount of credit provided to you. This will normally be the amount of cash you will receive from the lender. First-time borrowers can expect to qualify for a $300-$1500 loan. Repeat borrowers can qualify for much more.
Finance Charge: The dollar amount the loan will cost you. This is the interest you will pay on the loan.
Annual Percentage Rate (APR): The cost of your credit as a yearly rate. Because these are small, short-term loans, the APR is typically quite high.
Total Payments: The total amount you will have paid after you have made all payments as scheduled. (This is the amount that you will write on your postdated check.)
These figures can vary wildly between payday lenders. The Annual Percentage Rate (APR) is especially prone to abuse. You should treat payday loans as you would a new car … shop around for the best deal! Someone looking to secure a payday loan should fill out applications for several different lenders, then accept the one with the lowest Annual Percentage Rate (APR). Why pay more than you have to?
Payday loans at your fingertips.
It used to be that to get a payday loan you had to go to one of the shops in the strip-malls and sit in a waiting room with many others. Fortunately this is no longer the case. 2004 saw entire online companies spring up solely to administer these loans. Now the entire process can be completed in minutes from the privacy of your computer.
Fraudulent websites & Potential Pitfalls.
Unfortunately, as with any innovative idea come the scammers. Hundreds of “payday loans” websites have popped up, claiming to offer the best deals. Many charge excessive rates for even the smallest of loans. Other problems are:
1. Charging application fees (NEVER pay a fee to apply)
2. Excessive loan “roll-over” fees
3. Hidden charges
4. Zero help or customer service
Many of these SCAM sites won’t even respond to customer requests. Eventually they get shut down due to too many complaints, or the State Attorney General forces them out of business. But the borrower is already locked into a bad deal, and the SCAMMERS just open another payday loans site under a different name in a different state. It’s definitely “buyer beware”.
Yes, payday loans can be a real life-saver.
If you can stay away from the SCAM websites, and remember that payday loans are meant for short-term emergencies and NOT for long-term solutions, then they can really be a life-saver.
Before applying online for a payday loan, you should be sure that the website satisfies the following minimum requirements:
Well organized, easy to navigate sites.
Helpful resources available for newcomers.
Short, 1 or 2 page applications that can be completed in minutes.
No application fees.
No credit checks.
No hidden charges.
Bad credit or bankruptcy not a problem.
Loans deposited into checking account the next morning.