Category Archives: Auto Loans
A Guide to Emergency Cash Loans and Payday Loans (Page 1 of 3)
In this rapidly deteriorating economic climate, emergency cash loans and payday loans are becoming increasingly popular. The problem with these is that more and more people that have never required a short term unsecured loan in the past are finding a need to obtain one for that rainy day for which they have no longer been able to save up.
Many people are spending their savings, and the term life savings is now a bit of a joke. Those that can afford a life savings scheme dont need it, and those that need it cant afford it. Of course I dont mean that literally, because many people are saving and need their savings, but nevertheless the sentiment is pretty accurate. Saving is getting harder, and when that unexpected expense comes along then those that not too many years ago would have had something put by to cover it no longer can.
Hence the upsurge in emergency loans and payday loans, and there is really very little to chose between them. This guide is intended for the newcomer to this type of short-term borrowing, and how you can make it work for you, or how it can cost you more than you can rally afford. Its all about using the loan for the right reason and paying it back as agreed.
THE AMOUNT
Unless you are dealing with a company with few morals, you will likely be offered no more than up to $1,000 for your first loan. Some companies restrict that to $600 for first time customers. The reason for that is that the loan is not secured, and even though legal action would sequester the cash back from your income, most loan companies would rather not do so for a large amount, and it is easier and less expensive to recover a small amount than a large amount.
Once you have successfully repaid your first loan, then the amount you can subsequently borrow steadily increases.
THE REASON
The reason for taking such a loan has to be compelling. If you can borrow from a family member or good friend then do so because it will ultimately be less expensive for you (unless they charge you a high rate of interest!). It is not economical to use an emergency loan to pay another loan, although if you are in danger of defaulting on accredit card payment you might think the extra expense worth maintaining your good credit record: no price can be put on that.
However if your credit is shot, as it is with many people seeking emergency cash, it would likely make no difference other than the fact that you could likely negotiate lower charges with the credit card provider than you would get with a payday loan.
There are other reasons for needing emergency cash loans apart from being unable to pay regular bills, among them family deaths where the life insurance is insufficient to meet all the expenses. This is becoming more common as process rise while investment rates remain stagnant. The same is true at the other end of the life scale: weddings. These too can be high cost events that few couples or their parents have had the opportunity to plan for financially.
Why Apply for a Loan?
There are many reasons why consumers take out loans. Two of the most common types of loans used by most consumers at some point during their lives are homeowner loans and motor loans. Mortgages are required by most home buyers who need financing to help cover the costs of purchasing property. Some existing homeowners also rely on their property to secure second charges for various purposes. Most car buyers also obtain lender financing to help cover the costs of the vehicle purchase.
While property purchases are among the more common loans types, borrowers rely on financing or credit various reasons. Some borrowers use personal loans, or the second charges mentioned, to consolidate debt created by other loans, renovate or upgrade property, go on a vacation, make a large purchase, or other important needs. Loans that are secured by property usually come with more favorable rates and terms because they pose less risk to the creditor. This is why secured loans are popular for consolidating debt from higher rate loan and credit balances.
Another type of loan used by some budget-oriented consumers is pay day loans. These are loans that are awarded in advance of a pay period. They are used by consumers who rely on paycheck income to cover basic expense requirements. Some borrowers use these loans to cover financial needs in advance of a pay period. These loans are often secured by personal property, such as a vehicle. They are generally short term loans.
Along with the aforementioned loans, many consumers regularly shop with credit cards. Credit cards are commonly used to cover basic purchases using a ‘Buy now, pay later’ mentality. They are useful at times to cover important purchases, by consumers are often irresponsible with credit cards.
The key with any type of loan is to only take out an amount that is needed and no more. Some consumers do not fully understand the risk posed by taking on debt. Taking on too much in loan debt can create significant financial burdens for consumers. Not meeting monthly debt obligations can lead to a poor credit score, which ultimately makes it more difficult to acquire a loan when it is needed for an important home or auto purchase, or even insolvency and foreclosure in extreme cases. Consumers need to take out loans responsibly, when it makes financial sense to do so. Taking out a loan for discretionary spending or non-essential purchases is generally not advised.