Home > Payday Loans > Payday Loans Using 401k Plans
Payday Loans Using 401k Plans |
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My friend, Nick, is badly in need of money but can't get a loan. He has several payday loans that he can't pay off. He has been trying to pay them back for a long time now, but due to lack of money he is just able to renew them. He wants to cash out his 401k. That way he'll have enough money to pay off the payday loans. And he'll even have enough money every month to put back in his 401k plan. He learned his lesson the hard way and never wants to use payday loans again. You might also be in a situation of cash crisis and wondering what to do. Before you decide to go for payday loans, get to know what they're all about. Payday loans are also known as cash advance loans, check advance loans, post dated check loans or deferred deposit check loans. They have been termed "costly cash" by the FTC. There are over 10,000 big and small lenders dealing in payday loans, and per estimates, they earn more than $2 billion a year in terms of fees and interest. The procedure for getting a payday loan is very simple. You just need to write a check for the amount of the loan that you want, plus a fee. The amount of the fee depends on the amount of the loan. Most of the loans, including payday loans, are governed by usury laws. These laws limit the amount of interest that can be charged on a loan. Surveys revealed that payday lenders charged interest ranging from 390% to 871%. The average APR was found to be 474%. Despite the federal Truth In Lending Act, most payday lenders don't want you to know the exact amount that you would be paying. In the survey, only 37% of lenders quoted an accurate APR. It's a known fact that people go for payday loans only when they have failed to arrange the money from every other source. Even a cash advance on a credit card would cost them less. A cash advance on a credit card would cost you somewhere between 35% and 50%, which is obviously much better than paying more than 400% APR. Instead of payday loans, borrowing from your 401k plan would be a better idea. It would provide you with instant money for your need, and allow you to pay it back through payroll deduction. You need to speak with the human resources department of you organization to find out more about a 401k loan. The best part about a 401k loan is that money borrowed is not subject to tax penalties. Also, it won't be added to you income for tax purposes unless you repay the loan. Payday loans are usually sought after by persons who don't qualify for a credit card or a loan. If you are one of them, the first thing you need to do is to check your credit report for errors. A corrected credit report might solve the problem for you. In case you have other debts, you can try out credit counseling or debt consolidation. Finally, whatever decision you take, but you should cut down on all those expenses that can be done away with. |
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