What is a payday loan?
A loan provided until your first or second payday that rarely
exceeds 30 days, in most cases not to exceed 14 days. It is a
high interest loan with no credit check. The rates for this loan
are commonly called fees vs. interest. The annual percentage rate
could at times exceed 1000% depending on the number of days you
have your loan out.
What are payday loans often referred to as?
Payday loans often go by a variety of names: cash advance, post
dated check loan, deferred deposit loan, cash loan, no credit
check loan, and many other names. When you are online, you will
see banner ads with the catchy words like fast cash, get cash,
cash now, cash in minutes, overnight cash, get up to $500, and
many more phrases to catch your attention and draw people to
their website.
How much does it cost?
A payday loan is very expensive if you are comparing it to
conventional credit rates, you will pay $15-$30 per $100 borrowed
for most cases 14 days and may even cost more if borrowing
online. Wells Fargo Bank charges $10 per $100 for a direct
deposited advance, but even this can be very costly because the
money is taken from your very next direct deposit, which in many
cases could be a few days. Like I said, compared to conventional
credit, payday loans are very expensive and should be used with
caution.
Should I use it to buy a gift or put weekend money in my pocket?
Absolutely not! In emergency cases only, should you get a payday
loan. If you are a frequent user of payday loans it will not take
you very long to see how much of your hard earned money you are
flushing down the toilet. My advice to you is, only use payday
loans under emergency situations and never make a habit of going
to the same well.
What are my alternatives?
First show restraint and build your credit history. There are
many non profit groups that will work on your behalf to build
your credit. Ask your creditors for more time to pay your bills.
If you don't think you are making headway in doing this, again
there are companies out there that will help you negotiate for
lower payments so you can loosen up that much needed cash. Make a
realistic budget. My best advice is to keep a small notepad with
you at all times and make a habit of writing down everything you
purchase, including coffee, quick snacks, etc. You will see how
your spending adds up. If you're not good at putting this budget
together then get help for some financial planning. I've always
made a habit of getting help from people who are gifted in areas
that I'm not. Six months worth of payday loan fees will put an
extra $600 in an emergency fund account or get some much needed
bills paid off. This will take time, so you must work hard to
practice self discipline. It takes 6 hard weeks of practice to
create a new habit.
If you need time to get a good head start try some of the
following ways.
1) Ask your bank if they offer overdraft protection. Caution:
Many banks have it but if you go into overdraft they will charge
you a hearty fee, same as an overdraft fee which can be as much
or more than a payday loan fee. Make sure you ask your bank
officer about the fees that may be attached to overdraft
protection.
2) I know many people don't want to go to family members, but if
you put together a good plan of action in writing on how you're
going to turn your financial situation around, and let them know
how they will get paid back, many family members will help.
Remember to show them how you will cut back, if you don't show
them how you will be willing to make the necessary sacrifices
they probably won't want to make the sacrifices themselves. So be
prepared.
3) Ask your employer if he/she will give you an advance on your
payday. Again, if you simply explain your problem many employers
will be sympathetic especially if you are a good employee. As an
employer I would do it for anybody on my staff.
4) You can try a high-interest credit card, but even this
requires some self discipline. Even a high-interest credit card
is much less than a payday loan. If you discipline yourself to
use the fees that you would normally pay to a payday lender to
pay down your credit card you will have it paid off in no time at
all.
5) You can try the company http://www.spotya.com. Spotya! offers
cash advance loans without a credit check. The most you would
ever pay is $7.50 per $100 borrowed for 30 days. This is less
than some banks charge. No one, either online or even your local
payday loan store, comes close to the cost of this no credit
check loan. Once your loan is paid off you can always re-loan for
a smaller amount until you are back on track.
The bottom line is that we all get into payday loans because of
some emotional purchases we have made in the past. It is
perfectly normal to desire something better, prettier, more fun
or exciting, but only after we have counted the cost. Many of us
also get a payday loan because of some sort of short-term
emergency, but the root of the emergency derived from foolish
spending in the past. So let's get the help and create the
discipline and habits we need to get out of debt. You can do it!
I've taken the time to put together some of the following
resources.
http://www.ftc.gov/bcp/conline/pubs/credit/repair.htm
http://www.consumercreditrepair.com
http://www.financialplan.com/cs/creditdebt/a/getoutofdebt.htm
http://www.credit.org
Rich Dad Poor Dad By: Robert T. Kiyosaki
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