“Faxless Payday Loans came to our rescue! To get money deposited in my checking account took just a couple hours and a short application. It was easier than I could imagine! I was able to pay to get my car back.” –Tina R., Philly, PA
Payday loans? Peer-to-peer loans? Personal loans? Auto loans? Emergency loans? Student loans? Secured loans? Unsecured loans?
Whatever the loan, if you have bad credit and you need money, you will pay for the privilege…bottom line.
Let’s be clear, not all these “payday” lenders are the same: some charge outrageous fees, and some charge obscene fees. Pick your poison.
These loans—all loans—translate into money, interest, credit & responsibility.
For Trisha T. and her family, they needed and received temporary financial help from their local church.
Whatever your ‘lending’ need, please review all ‘pay-back’ terms.
What’s In The Small Print…Or Under The Hood?
Today, loans exist for every conceivable need. However, the greater the need and the risk, the greater the re-payment terms for the lender. That’s logical. If you have bad credit (read: increased risk), the lender wants to ensure his/her money gets repaid.
THE TRADE-OFF
Face it, you will pay more for the “privilege”.
Many people living paycheck to paycheck or recently unemployed need a little financial help. Sometimes they need a car and go to the ‘buy here, pay here’ car dealers.
Be careful. Many of these dealers charge more than the state-allowable interest rate (read: usury law) and install GPS tracking devices without your knowledge.
Did you know ths? Yep, that’s what they do. If you stop paying, they know exactly where to send their repo man. Unbeknown to you, these car dealers know exactly where ‘their’ car is at all times. Stop paying and they know exactly where to go to re-possess it.
Too Much Week & Not Enough Paycheck….
The payday lending industry has exploded…with a store on what seems to be every street corner with their bright flashing neon reminiscent of pawn shops. With some of these ‘payday lenders,’ they rip off people desperate for a little money to hold them over until payday.
For years, this took place with many good people in the military, who took out ‘payday’ loans, only to get squeezed with outrageous fees. And then the government stepped in to curb this theft.
Where’s The Help When Needed?
Unfortunately, if you have damaged credit or no banking relationship, you may be forced to the payday lenders. According to the Florida Attorney General, the payday lending industry receives many complaints about undisclosed repayment terms, etc.
You must know the terms before grabbing the money. Look at www.lendingclub.com — apparently, this peer-to-peer lending concept is explodying in popularity, aimed at people with ‘better’ credit who don’t or can’t go to the banks or payday lenders.
When faced with a financial decision, you first need to evaluate your situation and consider all your options. Whether a car loan, a student loan, a payday loan or any other kind of loan, carefully review your options:
Step 1: Evaluate your situation.
Consider the answers to the following questions in order to gain a complete understanding of your situation:
• Exactly how much do you owe right now?
• When do you have to pay?
• Have you talked to the creditor or lender about your options?
• Does the lender or creditor offer a payment plan?
• What are the consequences of not paying?
Step 2: What are your options?
Based on the questions above, what are your options. Is this a short-term crisis with small utility bills, for instance? As with any financial crisis, please…please call your creditor(s) and talk to family and friends.
Don’t alienate family and friends in a crisis, despite any embarrassment or humility you may feel. Put that aside and realize that everybody experiences unforeseen crises in life. Our friends and family may be able to help brainstorm options where we cannot see options—we’re too close to the epicenter of the financial storm.
As for contacting your creditors, do it early. Get the name & extension of all people with whom you speak and take good notes. You will not be the first or the last to notify a creditor of a hardship and a request for their help.
Step 3: Take action
In a crisis, you may get relief from one of the following sources. Of course, each provides relief, though each comes with caveats as well:
• Credit cards – Credit cards allow you to stay afloat. If you must, you can pay only your minimum each month—not good but neither is your situation. It would be nice if you could keep debt2credit around 30-35%. However, do what you must to provide for your family.
• Family & friends – Should I even mention this option? If you do borrow from a friend or family member, complete a Promissory Note (an official IOU). Show that you expect no special favors and that you will honor the terms of the Note. If you need a copy of a Promissory Note, ask us.
• Savings – If you have a 401(k), you may be able to tap it under a “hardship distribution” policy. Depending upon the situation, you may have to pay a 10% penalty on the amount you withdraw, however. Again, a family crisis requires some concessions—10% is a small price to pay for peace of mind. If you have a 403b, you may be able to take a loan and then pay it back. Call your plan administrator for details.
• Emergency payday lenders – If you cannot withdraw from your savings, don’t have access to credit cards, and can’t borrow from a relative, you may need to turn to an emergency payday lender. You can borrow from $200 to $1,000 with these 14-30 day loans. The fees for these loans range between 8-25% of the amount you borrow. As with any loan—but especially with payday loans—read (and understand) the terms for repayment.
• Personal loans – You can borrow $1,000 to $15,000 with a personal loan. These loans have a 1-4 year term and work best if you have a stable income and need cash for a financial emergency. The annual percentage rate for a personal loan ranges from 5-20%.
• Home equity loans – If you own your home and have equity, you may be able to get a HELOC (home equity line of credit or a home equity loan. The difference: with a HELOC you might get the loan for $50,000 but you’re only paying interest on the amount you spend. Whereas with a home equity loan, you immediately get a check for the full $50,000 for instance and immediately pay interest.
Last, don’t forget (I know you won’t) that a HELOC and a home equity loan are tied to your home. If you miss payments, you risk losing your home. For many of us, there’s the “too much month and too little paycheck” problem.
When the car breaks down and we have to get to work or we want to buy the kids school clothes or Christmas presents, we need to find a decent source of short term money…someone who is not gouging us.
Who’s your favorite short-term money lender on or off the Internet? Let’s compare notes to help keep others from getting scammed. Thanks!
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