A Bit About Payday Loans in General |
|
If you are in need of quick cash, you can apply for payday loans. Payday loans are short-term, unsecured loans. You can avail these loans only for two weeks. But if you are unable to pay back the loan within the two weeks, you can rollover your payday. If you extend or rollover the loan, you'll pay additional fees each time. The fee may not sound too bad, but studies have shown that interest rates on payday loans range from 390% to nearly 900% and that most lenders don't quote accurate interest rates. Thus, payday loans are not so much friendly to borrowers. However, in America, payday loans agencies are growing by leaps and bounds. Whenever you go through your daily newspaper or turn on your favorite TV channel, you would find catchy commercials of numerous payday loans agencies. But be aware! Never run after them. There are a lot of agencies that have mushroomed only to earn quick bucks from consumers. To get payday loans, consumers only need to provide personal identification, personal checking account, proof of income, and social security number. Unlike a standard loan, you need not provide a copy of your credit report when you apply for a payday loan. No doubt, payday loans are a quick and easy alternative to process instant cash in your emergencies. Nevertheless, you should not directly head for one. The interest rates on these loans are very high and the agencies that issue them often insist on hidden fees. So, it's better to go for other sources like credit unions, friends, or relatives. When you apply for payday loans, you need to write a personal check payable to the lender for the amount you wish to borrow plus a fee. The check is dated for your next payday or another day within the next couple of weeks when you have to repay the loan. At that time you usually have three options: let the lender deposit your check automatically, pay the lender in cash equal to the amount of the check, or roll over the loan and pay the fee again. Before you make a deal with the payday loans agencies, you are requested to sign a wage assignment. But you are free to cancel the wage assignment if you are not satisfied. If you have already signed an authorization to allow the payday stores to electronically transfer funds from your bank or checking account to the payday loan company, you can call your bank and tell them not to honor the check. But for that you need to pay a fee. Payday loans are generally targeted to low-income working consumers who have little to no savings and live paycheck to paycheck. The agencies do so because they know that such consumers would not be able to payback the loan within two weeks period of time and thus, they can earn more from the interests. As the customers stretch their repayment periods, more money would come to the agencies' lap. Although the payday agencies advertise the payday loans as onetime assistance for financial emergency, but in reality, things are entirely the opposite. A recent study by the Center for Responsible Lending has revealed that 91% of all payday loans are made to borrowers with five or more such loans per year. Borrowers, on an average, receive 8 to 13 payday loans per year from a single payday agency. But it's always difficult to stick to only one agency, as the interest rates are very high. Therefore, borrowers often go to more than one outlet (1.7 on an average) and take out 14 to 22 loans per year. In fact, most borrowers end up paying consecutive fees for no new money. To be precise, only 1% of all payday loans go to onetime emergency borrowers who pay their loan within two weeks and don't borrow again within a year. Thus, payday loans are not that helpful as they are made out to be. Theoretically they may sound good, but in practical grounds, they fail to satisfy many consumers. |
