Pay Day Loans – Avoid the Trap!

Put simply, a Pay Day loan (or its equivalent, called by fancier names like Advance Pay or Cash Advance or Convenient Cash) are high rate loans that either are designed or result in “trapping” its users for a long-term addiction to such loans. One study estimates that the average rate of interest (if calculated, since such loans do not “charge interest, but charge a fee for their service”) is about 390% per annum! So in fact for every dollar borrowed, you pay three dollars in interest in a year.

Now here is a quiz.

How often do Pay Day users return to use the same service at the same usurious (imputed) interest rate?

Again, a study estimates, about 76% of the time!

So like a narcotic, once you get addicted to receiving a Pay Day loan, most of you will not get out of the hell-hole for a long time. That is because most of us, as humans, tend to do what comes of a habit.

So typically you to the Pay Day window say on a Friday of the week you do not get paid. You “pledge” your next week’s paycheck for a fee. How much fee? say 5% of the pay check. Small amount of fee, right? WRONG! You are paying 5% effectively for a week, since your paycheck will already have been cashed next week by the lender. 5% a week amounts to 260% per annum.

It would of course be ridiculous to think of it that way if you were never to return to that window. So you pay 5% that week and live happily ever after, never darkening the Pay Day door. Unfortunately, as statistics show, most of the Pay Day users are repeat offenders. Yes I say offenders because they are robbing their family of hard earned dollars.

Pay Day lenders justify their practice, which by the way is perfectly legal, since the usual usury laws do not apply to them, in a variety of ways. And in fairness, they do serve a purpose–but similar to a doctor prescribing pain killers to an addict. Among the reasons cited by them: high default rate, high risk, difficulty in recovering bad loans, absence of alternative lenders who can serve this sector etc.

So the important question is–what can you do to avoid Pay Day borrowing. Here are some tips.

1. BUDGET

2. USE S.M.A.R.T. SAVING PLAN

S is for saving

M is for managing your expenditures

A is for accumulating useful assets

R is for reducing deb

How Beneficial Is A Payday Loan?

When you are in a difficult financial situation, you might not have the time to approach your financial institution and have a loan processed as fast as you need the money. If you are the type that does not like to bother other people with your problems, you might also not find borrowing the money you need from friends and family. A payday loan can be your ultimate solution in such situations.

The payday loans are short terms small loans that are processed fast to cover your emergencies and then you get to repay them as soon as your salary reflects. They save the day when you need money and your paycheck is still days or weeks away. The loans are very popular and they come with a number of reasons that makes them beneficial in those financial situations that really cannot wait till your next pay.

1. A payday loan is beneficial in the sense that it is very easy to apply and have a list of requirements for you to qualify. The only thing you might meet need to show is proof of income so that the lender is sure you will manage to repay as agreed.

2. The loan is super fast in terms of processing compared to applying for a bank loan and waiting for processing. As soon as you fill out the needed application, you get the cash advance that you have applied for in a matter of seconds. Most lenders will never go past an hour after your application is approved. This means that you can even take care of emergency situations within no time at all when you choose a payday loan.

3. A payday loan offers you payment flexibility, making it possible for you to settle it as soon as you get paid. You do not have to keep up with loans that take longer to repay and attract interest rates over that repayment period they stretch over.

4. With a direct payday loan, you are less likely to default. This is because you get the amount that is sufficient enough for your income to cater for. A cycle of debt is eliminated by the payday loan since you are sure that the amount you expect from your next check will actually cover the loan you have received. It is a fact that protects you from debt and keeps your lender protected as well.

5. A payday loan can be termed as convenient considering that most lenders work outside the regular banking hours. It means that you can obtain the emergency cash that you need at any time or immediately the financial situation arises. Most of the lenders actually make it even more convenient for you by offering online services where you can apply and have your small loan processed without moving an inch from where you are.

6. A payday loan is very discreet making it very good for you if you do not want to let anyone know about your financial woes. The fact that it is processed fast makes it possible for you to avoid borrowing from people you would rather not let know that you have some financial issues such as family members and friends. The loan allows you to handle your issues personally and in total discretion if this is the route you find most appropriate for you and your finances.

A payday loan can save you not only in emergency situations, but also in paying up your fees and bills when there are risks that could end up hurting credit ratings. It can save the day for you thanks to the fast processing.

10 Tips Before Applying For Payday Loans

1. Automate the debt payment – Payday loans are issued to individuals who have a stable source of income. In other words, your application will be approved only if you have a regular income or salary every month. It would be so much simpler if you can just repay the debt with the money you receive next month. However there are some people who are not able to do that. They would spend the money elsewhere and be left with little for the repayment. So visit the bank and automate the debt repayment. The money should go to your creditor as soon as it reaches your bank. You can spend the balance left in your account. In fact most creditors have the automate payments forms with them. Just ask them and they shall be able to provide you the same. If you take a loan from us, you have the option to make the repayment in an automated mode. On your payday the cash will be directly debited from your account and credited to our account automatically. You may forget to pay so this is the safest route to avoid late payments. Some people have cash but forget to pay, so automating the payments is a great way to avoid late fees. In fact you must automate your payments for all your credit cards.

2. Cut your expenses – You are in debt, so the last thing you should do is spend a lot of it. Make this the central objective of your life for the time being at least. So go ahead. Reduce your expenses wherever you can. Make a plan. Go back to the drawing board and see where you can cut the expenses. Get rid of the costly cell phone plan or cable package. Get something simpler. Try to reduce your grocery budget. There is always something you can do without. You can get rid of the debt easier this way, and will also be left with money in your account that you can save every month. This will help you in the long-term.

One of the best ways to stop spending on things that you do not need is to stop watching TV or reduce watching to a large extend. They show all kids of excellent advertisements and we are compelled to buy. Just do not see them and you stop buying products with little or no use. And of course save money.

2. Increase your income – Have you ever thought of trying to earn more money? By doing this you will certainly be able to pay off the debt quickly. A second stream of income may help you avoid taking a loan in the future as well. Contrary to what many believe, earning a second income isn’t really that difficult. For instance, you could sell off all those unwanted things you have on eBay. You will make some quick money to pay off the debt, and will also be able to reduce the clutter at home. You may also start a blog to make some extra cash for the long-term. Or you may find week-end jobs. There are plenty of ways to make some extra bucks. You just need to try.

3. Make small payments – The term of a payday loan is small – you have to repay the money after receiving next month’s pay check. But if you can make some extra cash in the meantime, then you may consider paying off a portion of your debt with it. This will help you keep your burden in check, and will make it that much easier for you to repay later on. Plus, if you keep repaying, then you won’t be wasting the extra money you are making. Find out from your payday lender if you are allowed to make small payments in the middle of the month.

4. Is there a prepayment penalty – Sometimes there is a prepayment penalty if you pay off the debt early. Ask the creditor while you are taking the loan. If you have taken a loan already with the penalty, then calculate how much it would be in money terms compared to the interest you will save if you pay it earlier. This will help you arrive at the right conclusion on whether you should pay off early.

5. Lower the interest rate – Try to negotiate with the lending company if you can. See whether they are willing to reduce the interest rate. Sometimes, a few companies will oblige, because they too want to do business. These agencies might agree if they see that you are serious about trying to repay your debt. It’s always going to be easier for you if you have to pay off the debt at a lower interest.

6. Borrow against life insurance – One advantage of a payday loan is that, you can get the money you need very fast. It can be transferred to your bank account in 24-48 hours. That is perfect in an emergency. But once you have the money, you will have some time in your hand. So you can try other options. For instance, you can borrow against your life insurance and other savings and policies to repay your existing debt. Yes you will be receiving less money later, but that’s a small price to pay for leaking cash at this point in life. Life insurance interest is below the commercial rates, so you will be saving more than you spend.

7. Borrow from your 401(k) – Similar to the point above, you can borrow up to 50% if you participate in a 401(k) retirement plan at work. So see how much money you have in your account and take out a portion of this to repay your debt. Don’t worry. Payday loans are small dollar loans anyway, so you won’t have to take out too much money.

8. Renegotiate the terms – If for some reason you see at the end of the month that you cannot still pay back the loan, then try to renegotiate the terms with the creditor. Convince the lending agency that you remain serious about paying it back, and there will be many who will try their best to help you. Perhaps your fees or interest can be reduced. You never know unless you ask. After all, the payday company too wants to get the money back. Our lenders will co-operate with you if you inform them well in advance that you will repay your loan but you need some time. Our lenders will work with you to find a plan that works best with both you and the lenders. But please inform them at least one week in advance.

10. Get eligible tax deductions – Are you getting all the lucrative and eligible tax deductions? You will be surprised to know that many people don’t get this simply because they don’t know the details. Get professional tax help if you need. This will help you in your long-term financial health. You will have extra money with which you can pay off the debt. In fact, you may not even need the loan