A loan is simply an agreement to pay back an amount of money that has been borrowed, along with any interest, and sometimes finance charges or application fees.  Loans can be as simple as someone you work with loaning you $20 and you paying them back $20 on payday, or as complicated as a bank lending you enough to start your own business, and you pay the bank back within a specified length of time.

Usually, when we see the word “loan“, we’re talking about an amount that is most likely over $100 dollars, and is obtained through a lending institution of some sort.  (Banks, credit unions, and independent loan companies are examples of lending institutions).

There are different types of loans; however, most loans fall within one of two categories: (secured and unsecured loans), and personal loans.

Unsecured personal loans are often referred to as “signature” loans.  The lending institution does not require you to “put up” some form of “collateral”, such as a bank or money market account, or some form of personal property (a car, home or other real estate, or something else of value).

Some financial institutions may ask you to have someone co-sign with you on an unsecured loan, however.  In this way, should you be unable to repay the loan, the co-signer would be responsible for the payments.

Secured loans are those that require you to provide some sort of collateral, such as that mentioned in an earlier paragraph.  The most common or familiar type of secured loan is an automobile loan, because the lending institution maintains control of the ownership papers (the title, in other words), until the loan is paid in full.  If the loan is not repaid, or payments become severely delinquent, the lending institution simply takes possession of the vehicle.

Another example of a secured loan is the very common payday loan.  You may think that this type of loan would be considered an unsecured signature loan, because, after all, you’re giving them a post-dated check, which has your signature on it.  However, when you think about it, you are actually securing this loan with funds that will be (or should be) available in your checking account on the due date.  If for some reason the money is not in your checking account when the check is presented to the bank, you will be “dinged” for the original loan amount, plus any interest, plus any insufficient fund fees that the loan company and/or your bank charges.  There are usually better options for obtaining a personal loan than a “payday” loan.

A business loan may be acquired in order to start a business, or in order to expand or support an existing business.  These are usually the most complicated types of loans. For this reason, anyone who takes out a business loan may want to have an attorney to look over the terms and conditions of the loan agreement.  This is for the borrower’s protection as well as the lender’s.

The ability to pay back a business loan is, of course, dependent on the success of the business.  The loan will still have to be repaid, even if the business fails.  This is another reason why an attorney can be an asset.  He or she can advise you on how much to borrow, and which repayment terms will be the best for your business.

Tags: automobile loans, loan, Loans, payday loans, personal loans, small business loans

The answer to that question depends on the circumstances. If it’s a true emergency-one that was totally unexpected, could not be anticipated in any way, and pretty much came “out of the blue”, then a payday loan (sometimes referred to as a “cash advance“) can be a good thing.

On the other hand, if the employees at the local cash advance office call your name out when you walk into the door, like they did to the regular patron on the ‘80s TV show set in a particular Boston bar, then it’s a lead-pipe cinch you’ve taken this (seemingly) easy route out way too many times. And, that is bad.

Print and TV advertisements make it seem like the easiest thing in the world: Walk in to the local branch, answer a few questions, write a check, get your money, and go happily on your way. When payday comes, just walk in and pay the amount of the check plus a “small” fee.

But, what happens if payday comes and there is no money to pay the cash advance loan? No problem, just extend it for another thirty or sixty days. You’ll just pay the amount of the check plus the fee, although it will be doubled to cover the extension time.

Yes, it sounds really easy, and convenient. And, it is. However, it is precisely this ease and convenience that serve to “trap” people in a vicious cycle.

There are some people out there who, when faced with an emergency that leaves them no alternative but to take out payday loans, will do so that one time, pay the loan off on time, and nothing will make them ever do it again. They will figure out a way to put a certain amount of money back from the next few paychecks to cover such an emergency, or they will sell something and put that money in an emergency account. But, they will never use a cash advance service again, ever.

Others, however, will find themselves literally using a cash advance office much like one would use a bank, “withdrawing” money for any reason, legitimate or otherwise. One day, however, they miss a payment, or find themselves unable to extend that original loan one more time, and they actually become worse off than before.

To make it worse, some (though not all) cash advances/payday loan businesses often persuade, or try to, a person to either extend the original loan or add to it. They’re going to do this because the fee is where they make their profit. And, the longer it can be stretched out, or the more fees that can be collected, the more money they will make.

Some places do try to “police” their customers, and encourage prompt repayment over extensions. Additionally, they do not use “teaser” or “get them in the door” tactics such as “first loan free” (no fee) or “make a payday loan, get a free…(whatever)”. These companies realize that most people have a legitimate need, and want to help alleviate the problem, not add to it.

Some states strictly regulate payday loan/cash advance businesses; others have only basic guidelines and regulations for their operation. Other states, however, do not consider payday loan/cash advance businesses as having any redeeming qualities at all, and, as such do not allow such businesses to operate.

Payday loans may be necessary, AT TIMES. But, as with anything else in life, the rule “all things in moderation” definitely applies here.

Tags: cash advance, emergency, payday loans