Tag Archives: payday loan
The Severe Drawbacks of Payday Loans
Although payday loans may seem like the easy way to fix your current financial problems, they are not. Instead there are many drawbacks to using payday loans, and you can benefit by learning about these before ever applying for, or receiving, a payday loan.
The extremely high interest rates charged by payday loan companies is one of the biggest drawbacks, and it is something that should deter you from ever using one to hold you over until payday. Some states have gone so far as to ban payday lending companies from offering loans to residents because of the predatory interest rates. In fact, some interest rates are so high that the companies can easily be considered ‘loan sharks’. These companies are often making huge profits by giving high interest loans to desperate people.
Why would people even consider applying for a payday loan with the high interest rates? For one thing the advertising campaigns run by most loan companies make it appear extremely easy to get a loan and just as easy to pay it back. The companies will simply ask for a canceled check to get your bank information and will get their money back directly from your account. What the ad doesn’t tell you is that because of the high borrowing fees and interest rates you will have double, triple, or quadruple the amount that you actual borrowed taken back from your bank account.
Harassment for non-payment is also a drawback to using a payday loan company. The amount which you are loaned must be paid back, and this may not be accomplished with just one paycheck if you took out a large sum of money. Instead the company will work with you to set up a payment plan that is explained to you before the loan is finalized. The company will make the payment plan seem reasonable and convenient hiding that you are often paying back additional fees. If you are late on a payment or a payment attempt is returned because of insufficient funds companies will call your home and work place constantly. Some will even contact your neighbors and family members to embarrass and harass you. Many payday loan companies have even found ways to go around the laws set in place by the Fair Debt Collection Act so that they can harass loan holders without fear of legal retribution.
Finally the largest drawback to payday loans is the fact that they are not a permanent solution to a long-term financial problem and can often cause more financial woe. If you are living paycheck to paycheck and experience a sudden emergency that requires quick cash, a payday loan will only cause more headaches for you rather than actually help you. You will still end up with an additional bill to pay to a lender that will usually not be reasonable if you experience repayment problems. It is important that you realize this and find alternatives to getting the cash you need in order to avoid serious financial problems later or even bankruptcy.
A Serious Emergency That Was Solved With A Payday Loan
Not so long ago we received a consult from a single mother going through a rather desperate situation. Her only child needed to go through a surgical procedure and she needed money urgently. Though she worked, payday was not soon and the money would not be enough either. The particularities of her emergency surprised us because they matched what payday loans were created for. We suggested applying for a payday loan and since she did, the problem was solved. Later, she visited us carrying her son in her arms and so I decided to write this article.
Using this case as an example, we will analyze the characteristics of a payday loan and the proper use it should have. Emergency situations happen every now and then and payday loans can save your day as they did to this lady. However, if you know how they work and how you should use them you will benefit more from them and will not need to count on the luck that this lady had when contacting us just on time.
Urgent Matters, No Time For Long Procedures
This single mother contacted us a few days before the day surgery was scheduled to occur. She wasted a lot of time trying to get money from friends and family with no luck at all. The amount she raised did not cover much. She did not need a lot of money though (the surgical procedure was not complicated). She just needed $1300 which the insurance would not cover because the procedure was needed to prevent a scar from showing when her son grew up.
As explained, she had committed to pay prior to the scheduled surgery which could not be postponed due to the nature of the injury that would heal leaving a scar if the intervention was delayed. Since there was no time for long credit and income verification processes, payday loans immediately came to our mind. Why? Simple, because payday loans can be processed within the same day and the money can be deposited into the applicants account by the next day.
Credit Problems, No Credit Checks, Few Requirements
This lady did not have a good credit score. Thus, even if she had the time to go through a long credit verification process, chances are that she would not have passed it. Fortunately, payday loans do not require credit checks at all. The whole loan approval is based on simple requirements that almost anyone can meet without hassles or sacrifices.
In order to obtain a payday loan, you need to show proof of income (by offering copies of paychecks receipts like this lady did or by showing copies of tax presentations if you are self employed) and you need to have a savings or checking account on a bank or financial institution where the money from the loan will be deposited and eventually the single or multiple payments will be deducted.
As you can see, payday loans are an excellent tool when there is an emergency. These loans where created to solve this kind of problems and not as a source of regular financing. As usual, our suggestion is to employ them wisely. If you think that your current situation is similar to the one explained above, then do not hesitate, the solution to your problem is a payday loan.