Payday Loans

Payday Loans Explained: Should You Ever Get One?

June 14th, 2012  |  Published in Payday Loans

A payday loan is also referred to as a cash advance, deferred presentment, or a check loan. Payday loans are short term, given in comparatively small increments, and secured against that individual’s next paycheck. Payday loans originated in the early 1900’s, since then, the industry skyrocketed and now has an excess of over 22,000 locations throughout the nation.

The general idea behind these loans was to provide a quick, easy solution for people who needed cash before their next paycheck. Payday loan companies hold a predated check, provided by the borrower, until the next payday. They will cash the check unless you go in the store to pay off the loan including additional fees and interest charges. If an emergency arises and you are out of cash, a Payday loan may be the only solution, especially for car repairs, dental bills, and medical bills.

Demographics

Payday loans are mainly targeted to assist people in low-income areas. They are clustered around colleges and military bases, increasing their visibility in these largely populated areas where there is always a need for immediate cash. Another market consists of vulnerable consumers mainly composed of welfare-to-work females, senior citizens, low wage service sector workers and immigrants.

Process

Payday loan stores, check cashers and pawn shops offer payday loans. A local phone directory or a simple online search will have a list of many payday loan locations. With access to the internet it may be easier to find an online payday loan company that accepts loan applications directly through their website.

Applying for a payday loan is a simple process with the options to submit an application at a payday loan location, by phone, through fax or online. To process the loan, you must show proof of an active & open bank account, an ID verifying that you are at least 18 years of age, and evidence of income. The turnaround time for approval or denial of a loan can often be discovered within minutes; however the standard time-frame is typically within 24 hours.

Obtaining the Money

There are various methods available to obtain the cash including a wire transfer, in store cash pickup, or direct deposit. Each lender has different policies regarding the amount of money they will lend, most often ranging from $100 to $1,500. The amount of the loan will ultimately depend on how much you earn per paycheck. If you need more money you can apply for additional loans from different lenders.

Repayment

Payment for any loan is expected in full and due on your next pay date. To extend the period of time needed to pay back a loan either renew the loan and pay interest and fees only, renew the loan and pay interest and part of the principal or let the loan auto-finance.

It is imperative to pay off the loan as soon as possible to avoid substantially high, exponentially increasing, interest rates that can range from 400% to 790% APR. Failure to pay back a loan will result in legal action, and the inherent risk of being reported to a consumer reporting agency.

High Interest Rates

Payday loan companies claim that processing these small loans costs more for them than other lenders so charging lower interest rates would not be profitable for their business. Approving loans for high-risk borrowers presents significant credit risk for them, legitimizing their high interest rates. Current market pricing of the loans is supposedly commensurate with the inherent risks of such loans and applicable operating costs. These companies also believe that the fees for Payday loans are less costly to consumers than available alternatives such as bounced check fees and potential late fees associated with credit card and utility bills.

Rules & Regulations

Every state requires payday lenders to be licensed and subjects them to examinations ensuring they comply with applicable federal and state laws. States have different legislation in regards to payday loans and its lenders. During the past decade, new laws governing the industry have been implemented to protect borrowers. While some states allow loan companies to charge any interest rate on payday loans, other states have issued a cap on interest. There are even some states that do not allow payday loans at all. You can look up your state’s guidelines here.

Benefits

There are some positive aspects of payday loans, the main ones being that they are easily obtainable, convenient, and the funds can be accessed quickly. They are extremely helpful for people who have low credit scores because there aren’t any credit checks. In tough financial times, when unexpected expenses arise, these loans can be life-savers. Payday loans are most appreciated when they are there to provide aid to those in disaster relief areas.

Issues

In tough financial times these loans can have an affect opposite to what they were originally intended to do. Since many borrowers do not understand the high interest rate trap tactics and the ongoing cycle of high-cost debt, they fail to recognize the ripple effect taking place. If a borrower cannot pay back their loan, they take out another loan to repay that loan. When they can’t pay back their second loan which was used to pay off the first one, they take another loan out, and the pattern continues from there. The period of time allotted to repay loans is not enough, thus making it impossible to pay back.

Returned checks from payday loan companies affect the borrower’s credit rating. Consumers can lose their bank account or may have difficulty opening up new bank accounts. Payday loan companies use scare tactics and threaten delinquent borrowers with check fraud.

Payday loan companies also don’t comply with the disclosure requirements of the Federal Truth in Lending Act. They disguise the fact that the rate of interest charged on loans is high; borrowers do not realize these rates are in the triple digits.

Alternative Options

– Use a credit card or credit card advance
– Ask a friend or family member to borrow money
– Obtain a Credit Union loan (better interest rates than a payday loan)
– Work out a plan with your creditor
– Take out a small bank loan
– Request a salary advance from an employer

The websites below are different programs for individuals who need small loans or financial assistance:
FDIC Small Dollar Loan Pilot Program
National Foundation for Credit Counseling

Protect Yourself

Take preventative measures to protect yourself from payday loan companies that do not comply with governing laws and who have unethical illegal business practices. First, check the governing bureau or regulator in the state or region that regulates commerce finances and securities to determine if the lender is licensed. Second, contact the Better Business Bureau to review complaints. Third, contact Federal Trade Commission to review past complaints filed.

When applying for a payday loan online, verify the loan lenders website is secure because submitting personal information through the internet poses a security and fraud risk. Always read and review the terms of the payday loan, the interest rate, applicable fees and the length and frequency of which you are required to make loan payments before signing. Make sure you can pay back the loan to avoid the common debt cycle.

To avoid having to obtain a payday loan, prepare for unexpected financial needs. Set up an emergency bank account and make deposits to it on a regular basis. Peace of mind is knowing that you have money set aside for a financial emergency.

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MoneyMutual Reviews – Legit or Scam?

January 25th, 2012  |  Published in Payday Loans

MoneyMutual is a website that provides matching services for people interested in payday cash advances, auto equity loans, or other types of short term installment loans.

MoneyMutual may be most recognized for their commercials featuring Montel Williams, promising that they are a trustworthy source that can find anyone a short term loan quickly and easily.

If you are interested in a short term loan between $200 and $1000, have employment and an active bank account, then you may be eligible to be approved for a short term loan in just minutes, with the funds being deposited into your account by the next business day.

What to Know about Short Term Loans

Short term loans are provided to those with bad credit, or no credit, who are not eligible for more traditional loans through larger financial institutions. These loans are intended to be paid back right away, often within 2 to 4 weeks.

Unfortunately, because these loans are often granted with very little restrictions, the interest rate and fees are very high, and can be difficult to pay back.

MoneyMutual is just a lender matching service, however, and not a lender. Once you have accepted a lender’s terms and rates, you will need to direct all questions and problems to the lender you have contracted with.

What to Expect from MoneyMutual

MoneyMutual can connect their clients with over 60 short term loan lenders, who have the ability to make real time decisions about providing you with a loan, so that you may have the funds directly deposited into your bank account by the next business day.

MoneyMutual is a free service, and will cost you nothing to use. You are also able to see what lenders are able to offer you without any obligation to accept the loan, or the terms and conditions provided by the lender, until you are sure you want to.

Their lenders offer installment loans, lines of credit, title loans, and auto equity loans. If you have any questions about what kind of loan you would be eligible for, MoneyMutual offers live chat assistance on their website.

Note: If you’re interested in learning more about Payday Loans check out our detailed guide, “Payday Loans Explained: Should You Ever Get One?” for more info.

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1HourDirect.com Reviews – Legit or Scam?

January 16th, 2012  |  Published in Payday Loans

1HourDirect.com is a payday loan matching site that helps connect those looking for a short term personal loan with a lender that meets their needs.

Payday loans are loans given to those who are looking for a short term loan, which is often approved simply based on whether or not you have steady employment and a bank account, rather than on your credit score.

With just a 7 minute loan application process, 1 Hour Direct promises to approve your loan in as fast as 90 seconds. However, 1 Hour Direct payday loans is not actually a lender; rather it matches you with a lender.

Lender matching sites like 1 Hour Direct are becoming more popular as more and more states enact specific laws that limit and regulate payday lending. 1 Hour Direct takes into account which state you live in before recommending a lender.

Because of individual state laws, however, this site is unable to match lenders with residents from Arkansas, Arizona, Georgia, North Dakota, Oregon, and West Virginia.

Always remember, however, when participating with payday lenders to make sure that you fully understand the terms of the loans and the fees that you will be charged with, as it is your responsibility to pay back the loan in full.

Do you have experience with 1HourDirect.com? If so, please leave a review below.

Note: If you’re interested in learning more about Payday Loans check out our detailed guide, “Payday Loans Explained: Should You Ever Get One?” for more info.

CashNetUSA Reviews – Legit or Scam?

January 13th, 2012  |  Published in Payday Loans

CashNetUSA is a payday lending company that also specializes in installment loans, Credit Services Organization, Line of Credit, Credit Access Business loans, and loan matching services.

As a national payday loan company, CashNetUSA takes into account the laws of each individual state their clients may live in. Because of this, they don’t offer all services in every state. You must look at their state guide to see what services are offered in your home state.

In order to be eligible for a payday loan or payday advance from CashNetUSA.com, you must be a citizen or permanent resident at least 18 years of age, with an active checking account, who has been employed for at least one month.

Payday Lending

Payday loans, or payday advances, are short term loans given to people who can verify they have a regular income and a checking account. Credit scores and equity will not be taken into account.

These loans must be paid back very quickly, generally on your next scheduled payday, and carry very high interest rates and loan disbursement fees.

Many times payday loans can be so high they make it difficult for borrowers to reasonably pay back the money according to the loan terms. This has made payday lending and payday lenders the subject of much criticism and scrutiny.

Is CashNetUSA Different?

CashNetUSA claims to strictly follow all the laws and regulations put into place by the state in which you live. For some people, this is important because certain states have made laws which significantly benefit those looking to borrow payday loans, often limiting the interest rates and fees that can be charged.

But other states have very relaxed laws regarding these loans, and therefore it is up to the borrower to make sure they understand all the borrowing terms and fees before they accept any loan.

For those who do choose to use CashNetUSA for payday lending or short term installment loans, they do have a Preferred Member Savings program that all clients are immediately enrolled into.

In the future, if you need to use CashNetUSA for another loan, you can use your membership number to be eligible for savings on your loan fees.

Note: If you’re interested in learning more about Payday Loans check out our detailed guide, “Payday Loans Explained: Should You Ever Get One?” for more info.

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Check ‘n Go Reviews – Legit or Scam?

January 12th, 2012  |  Published in Payday Loans

Check ‘n Go is one of the nation’s largest and most well known payday lenders, as well as specializing in car title loans, check cashing, payday cash advances, and short term installment loans.

Check ‘n Go was established in 1994 and provides lender services to customers at their in house locations in all 50 states, as well as services online. Not at all services are offered in all 50 states, however, due to individual state rules and regulations.

Check ‘n Go prides itself on working with your schedule, and not on banking hours, so that you can access check cashing and other financial services when you need them.

Concern About Short Term Loans

There is a wide ranging national debate concerning the validity of payday loans and payday cash advances. Since payday loans are targeted at people who need cash immediately and have no other means of receiving it, payday lenders often charge high interest rates, with the nationwide average being 390% APR.

In order to protect their citizens from predatory lending practices, most states have created rules and regulations regarding the approval of payday loans and limiting their fees. Some states have even outlawed payday lending, while others have few regulations that limit payday lenders.

But those who defend payday lenders claim they are providing a valuable service to people who would otherwise have no options for financial help, as they wouldn’t qualify for help from traditional banking institutions.

How Does Check ‘n Go Fit In?

Check ‘n Go is a member of the Community Financial Services Association of America (CFSA), a national organization that promotes responsible regulation of the payday lending industry.

CFSA requires their members to state their terms and fees as clearly and as easy to understand as possible, so that borrowers have the best chance at successfully paying back their loans.

To that end, Check ‘n Go also offers a guide on their website addressing each state’s individual regulations and fees concerning payday loans. However, at the end of the day, you are still the one responsible for all loans, so make sure you understand all terms and fees before agreeing to anything.

Note: If you’re interested in learning more about Payday Loans check out our detailed guide, “Payday Loans Explained: Should You Ever Get One?” for more info.