How Payday Loans Work

Have you ever been burdened with an unexpected expense, like a big car repair bill? How have you handled it? Do you use your credit card and pay for it, including interest, over a period of time? But perhaps you don’t have a credit card. Or maybe you’re one of the millions of people who carry too much debt, and have already “maxed out” your credit card. Do you have friends to borrow from? Most of us don’t like to do that – and most friends don’t like that, either. So what do you do? Well, you could get a payday loan.

What is a payday loan?

A payday loan has many names. Some call it a cash advance loan. Some call it a check advance loan. Another name is a post-dated check loan. Still others call it a deferred-deposit check loan. The Federal Trade Commission in the U.S. calls it “costly cash”. No matter what you call it, it’s the same thing: a small (usually $50-$500) short-term loan with high interest.

Why would you get a payday loan?

Payday loans are popular for a number of reasons. To those who are in the position of needing one, the advantages outweigh the disadvantages. And there are disadvantages, but we’ll look at those later.

First, put yourself in the shoes of the person who needs some quick cash. Perhaps you’ve just been put in the unenviable position of unexpectedly needing some cash and being “caught short”. You might have had an unexpected medical bill or car repair bill, or you might have to travel unexpectedly, like in the case of a death in the family. Others who need quick cash use it to pay their everyday expenses, like rent, groceries, utilities, etc. Whatever the reason, you need that cash and you just don’t have it.
Is a payday loan your last resort? Do you have other alternatives you could explore first? Well, what are the benefits of payday loans? Let’s see:

You won’t have to go through the hassle of a credit check.
You can apply in person, on the phone or on the Internet.
The process takes less than 20 minutes.
The loan proceeds are automatically deposited into your bank account within 24 hours.
It’s affordable, at least immediately – you don’t have any up-front costs.
It’s discreet – nobody else is involved.
It’s secure – your financial information isn’t shared with others.

Ok, that makes sense. Those are enough reasons to get rid of the stress of being short of cash. It’s a “quick fix”. You can cover the shortage, and get on with your life. And you’ll be able to pay it back next payday, right? So you’ve solved your problem.

Where can you get a payday loan?

Payday loan companies are all over the place. There are over 10,000 payday loan outlets in business in the U.S. And they’re spread out in similar fashion throughout the world. If there isn’t a payday loan store near you, you can search the Internet and find hundreds of online payday loans there.

These companies are in business to “help” those in dire financial need. They offer these loans to people who can’t find the money they need anywhere else. Let’s profile one company who offers payday loans as part of their overall financial services business – Money Mart.

Money Mart was created as an alternative to banks. Their hours would extend beyond banking hours, and they’d situate themselves in more accessible locations than banks. They could cash checks when banks were closed, and people wouldn’t have to travel very far for their services. They must have been on the right track because now, they have 1,700 locations in Canada, the U.S. and the U.K.

A typical Money Mart customer is an average working person, 32 years old (82% of customers are under the age of 45) and employed, with an annual income around the national average. These customers go to Money Mart because of their fast service, their convenient locations, and their extended operating hours. The founders of Money Mart were right – their original ideas still hold true today.

Since adding payday cash advances to their financial services, they’ve carved themselves a very nice niche in the industry. But they’re definitely not the only choice. You can now find at least one, and usually several, payday loan centers in every community.

Why would you choose not to get a payday loan?

Now that we’ve looked at the convenience of payday loans, let’s take a fair look at the disadvantages. Throughout the U.S., governments on every level are looking at payday loan outlets with increasing concern. Many people think that they take advantage of low-income people in financial trouble. Some go as far as to say they “prey” on them. Their argument to that is that they’re filling a need and they’re not doing anything illegal. So the controversy continues – let’s examine why.

Remember back when you thought you’d solved your problem and you could get on with your life? Well, what if your next paycheck, after your budgeted expenses, wasn’t enough to pay back the loan?

If you came up short again, you needn’t worry – payday loans are renewable, or extendable. This process is called “rollover” and, if you do it too many times, it could end up costing you a lot of money. Let’s look at an example: Say you borrowed $100 for 14 days (until your next payday). You write a check to the lender for $115 (includes your $15 fee). The APR (annual percentage rate) of that loan is 391%! If you can’t pay back the $115 on the due date, you can rollover the loan for another two weeks. If you rollover the loan three times, the finances charge would reach $60 for a $100 loan. That’s pretty high interest, don’t you think?

These are things you need to consider when you’re deciding if a payday loan is the right choice in your particular situation. Yes, the cost of the loan is high, but it provides you with the money you need, when you need it, thus avoiding a lot of stress and trouble. It’s very true in consumerism today that convenience costs money. But is it worth that much? That’s a question you’ll have to answer for yourself.

Payday loans are controversial – but they do fill a need

Now we’ve clearly shown both sides of the argument – and it’s a huge argument these days. So which party do you side with? That depends on your immediate situation. If you really just have to have it, and you don’t have any other choice, then a payday loan is probably the wise thing to do. At least you’ll be able to keep your sanity, even if it does cost you a few dollars.

When you find yourself in that situation, use it as an opportunity to learn. Remember, there are no mistakes – just lessons. If you have to get a payday loan, make sure you don’t roll it over too many times – that’s when it becomes a problem. And in the meantime, try to build up an emergency fund so you will be able to cover those unexpected costs. Become a good financial manager. Then you’ll have an alternative, and you won’t have to rely on a payday loan as ”your last resort”.

Which College Loan is Right for You?

Many young college students are under tremendous pressure trying to figure out how they are going to pay the high costs of college tuition. Often times, their parents are equally concerned about where the money will come from for their child's education expenses. If you're a worried student or have a college bound child and have exhausted the financial aid and scholarship avenues, your only solution is a college loan. There are several kinds of college loans available, but which college loan is right for you?

The first type of college loan is a federal student loan.

This loan is either subsidized or unsubsidized. Subsidized college loans are when the government pays the interest of the loan for the student for the time they are in school, but the student must show a great financial need to get this type of loan. Unsubsidized federal loans are available to anyone. With an unsubsidized college loan, the student must pay the interest beginning at the time the loan is issued. There is no deferment. Federal student loans are very easy to obtain and are the most commonly used.

The next type of college loan is a private student loan.

A private student loan may be required to add funding when other types of financial aid are not enough to cover the student's costs. Private student loans are credit based. They are unsecured, which means they require no collateral, but they have very high interest rates. Private college loans can be used for anything, not just tuition costs.

Parent college loans are another type of college loan to consider.

A parent college loan is a loan the parents can take for the full amount of the college tuition. This loan can span the tuition costs for all of the years the student will be attending college. This loan is convenient because it will be the only loan needed for the duration of your college years. The interest rates are much lower on parent student loans.

The last type of loan is the college consolidation loan.

This loan is used to consolidate several prior loans into one loan source with one payment to a single lender, rather than having several payments to several lenders. Most students find that they need this type of college loan after they made the mistake of not getting enough funding in an initial loan.
These are the college loans available. Before choosing a college loan, try to figure out how much you need. Then see if you can get any help from your parents, financial aid or scholarships. Be sure that when applying for a college loan that your credit is as good as possible. With some careful thought, you should be able to select a college loan that is right for you.

By Jill Dow

Business Loans - A Source of Finance for your Business

Have you been planning to start a new business but lack of sufficient funds has been stopping you? You need not worry; Business Loans are here to help you realize your dreams.
Business Loans are the loans granted for the use of a business. Business Loan can be used to start a new business, expand the existing business, to buy a new machine or equipment or for any other business related activity.

Business Loans can be a secured or an unsecured one. Secured Business Loan is a loan that is provided in exchange of property, machines or plants that serves as collateral such as houses, cars, savings accounts or bonds. Secured Business Loan also provides finance for working capital, which can be used to purchase raw material, paying the labour charges etc. Unsecured Business Loan is granted without keeping a property as a security with the lender.

Business loans can be taken for short, intermediate or for a long term, it depends on you which one do you want to take and for what purpose. Short-term loans are given to businesses that need cash to start operating, this loan is granted for one or less than one year. Intermediate term loan helps businesses to buy equipments and cover initial large expenses, this is granted for a period of one to three years. Long-term loans are used to assist start-up businesses with initial costs and are granted for a period of three to seven years.

Now you would say why only, Business Loan, when other loans are available in the market. Business Loans are tailored specially for people who want funds for their business. Business Loan provides the flexibility to preserve your cash and working capital. Business Loan also helps in managing cash effectively by offering flexible repayment options. Capital forms an integral part of every business.
If you are planning to apply for the Business Loan you need to look into three key issues: -

Cost –

You need to check the cost and risk involved in taking a loan.

Loan Size –

You need to decide the amount of loan you want that would satisfy your need.

Payback Program –

It is very important to decide at the time of taking a loan that how will you repay the loan amount and the monthly installments, otherwise it may create problems for you in future.
You can get a Business Loan from a bank or a financial institution. But shop around and search for as many lenders as you can, you can also look for online lenders. Collect quotes from various lenders and make a comparison among them to get the best deal.

You must make a loan proposal:

When applying for a loan you need to keep in mind that you must make a loan proposal. Lenders will grant you the loan only if they find your proposal worth because no lender will be interested in taking risk. While writing a loan proposal you should always give industry-specific details so that the lender is able to know in-depth about what business do you want to start or how your present business is run and what market trends affect it.

You should also give details about the existing or proposed business, collateral which you want to keep as a security with the lender, loan repayment plans, personal financial statement and projection of your future operations. The possibility of getting a loan will be higher if you have a good loan proposal and are able to convince the lender about your future business plans.
You can get a secured business Loan if you have CCJs, arrears or bankruptcy. Your bad credit history cannot stop you from getting the cash you needed to invest in your business or to start up your own business. Business Loan provides funds to businessmen who want to expand their business or people who want to start a business of their own. Success has no limits. Business loan provides you with the funds now it depends on you how use this money to climb the ladder of success.

By Pamella Scott