Whole industries have grown up to service the need for quick cash. Many of the options in this chapter (or should I say post as I am getting used to writing online instead of in a book) should be looked at cautiously.
Many of them could work to generate some quick cash, but they could cause long-term financial complications. People who want to raise cash quickly showed especially be wary of the get rich quick ads that are often seen on telephone poles, bulletin boards, and the Internet. These often not only produce no cash, but also take away much-needed money. Others, like payday loans, will work to generate cash, at the costs of the loan may be cost prohibited. Make sure to examine all of your options before settling on a choice that may work, but that you may or might regret.

Payday Loans

Chances are very good that you have heard of payday loans or seen their signs in strip malls or seen the ads on TV. This is a hot area of personal-finance right now, because regulators are eager to pass laws to control the use and abuse of consumers in these areas. Many consumers are eager to get the cash, and the industry is willing and ready to lend.

Some payday loans are available on the Web. However, most people who use the service go into a physical facility. It will vary by region, but many of them seem to be located in strip malls.

This loan is, in many ways, the opposite of a real estate mortgage. A real estate mortgage requires reams of paper and signatures. Often residential mortgages require more then a dozen signatures of the person taking out the mortgage and at least that many piles of paper. On the other hand, a payday loan only requires a bank account and a pay stub (as well as the proper identification depending on what state you live in).

The person gives the cash shop a postdated check. For example, if the person want to borrow $160, he or she would give the shop a check for somewhere around $200. At the end of the period which is usually two weeks, the cash shop would deposit the check. The borrower would get the short term loan he or she needed and the shop would get the difference between $200 and $160. On $200, $40 would be an effective return of 20% interest for a 2-week loan. That’s a pretty impressive return when you think that certificates of deposit pay between one and 2%.

If you pay between 10% and 20% per $100 to borrow the money, then the payday loan provider is making a tidy sum on the money. Consumer advocates have been big cracks of these loans because if consumers cannot pay the loan, they have to roll it over. Assuming the consumer rolled the loan over for a year, then the APR on annual percentage rate would be quite high. Think in terms of hundreds of percent for the loan. However, in many states, people are limited in their ability to roll over the loan. There’s no doubt that a credit union would be a cheaper source of lending. But as the payday loan industry points out, if you’ve got poor credit and absolutely no assets for collateral, it may be hard to get a loan from a credit union or universally conventional lending institution.

It can take as little as 15 minutes to get the cash in your hand from the brick and mortar store. The Web option relies on direct deposit into your checking account so that option will probably take at least one banking Day for the cash to arrive. If the loan is for a small amount, the store may advance the cash directly. But if the loan is for a larger amount, then you will probably get a check a have to take it to the bank. Be sure that you find out where the store’s bank is located. Generally speaking, if you have a check drawn on an account located in the same bank, you can cash it without any questions asked.

Advantages and Disadvantages of Payday Loans

The major advantage to this loan is speed, Dees, and a low profile. 15 minutes is pretty fast for a loan. The form is pretty easy to fill out. This generally no credit check, since you’re essentially borrowing money from yourself. It’s a pretty low profile way to raise cash compared to having a garage sale that all the neighbors can see. Keep in mind that in recent years a company called Teletrack has flourished in most payday loan lenders use their services to check on you and make sure you are not what they call a “cash advance skipper”.

the major disadvantage to this loan is that it is an extraordinarily expensive way to borrow money. However, the biggest risk to this way of raising cash is that by the time most people start hocking the rent money, they have arrived in a rough cash spot. So they borrow on their paychecks or welfare checks to meet an emergency because they don’t have the money. Then the loan comes due and they can’t pay it, so the star role in the loans over to avoid having to pay the loans back. This means that the interest keeps bouncing up.

This is a very expensive way to borrow money from yourself. If there are any other options it might be wise to look at them. In general, loans with cosigners can be troublesome for both parties. If the borrower doesn’t pay than the cosigner is on the hook and that can generally greatly strain out relationship. On the other hand if there were ever a time for cosigner this might be the time.

Technorati Tags: pay day loan, cash advances, paycheck loans, high interest short-term loans, government regulators

No related posts.

Related posts brought to you by Yet Another Related Posts Plugin.