Read these 7 Best Uses of a Payday Loan Tips tips to make your life smarter, better, faster and wiser. Each tip is approved by our Editors and created by expert writers so great we call them Gurus. LifeTips is the place to go when you need to know about Cash Advance tips and hundreds of other topics.
Cash loans have become increasingly popular because they can help people, but it also gives scammers a way to take advantage of others. Here are a few ways to avoid falling victim to a scam.
1. Throw out spam emails. Legitimate companies do not need to send you bulk emails soliciting you to take loans. Use that spam filter and ignore them.
2. Avoid Up-front fees. If someone wants money from you up front in the hope of receiving a loan, don't do it. You may as well kiss that money goodbye.
3. Avoid disclosure. Don't tell a cash advance company why you need the loan. You'll be more vulnerable!
With all of these methods to defraud people, CashLoanSource.com is an oasis. We deal only with bona fide businesses in the marketplace. We don't solicit on their behalf and they don't solicit to you. There are no up-front fees to use our services to bring lenders to you. Also, we verify these companies before they have access to your information.
The last thing you want to do is be irresponsible with payday loans. Even in times of need for emergency funds, make sure you repay the loan quickly to avoid problems. However, if you do delay, or potentially default on repayment, you could face serious issues.
By law lenders can only file a collection against your unpaid amounts. Since a cash advance usually comes as a signature loan with no collateral involved, you don't have to worry about a lender seizing any of your assets against the loan. However, ending up in the collection cycle can hurt you in the long-term. You'll end up having negative notations added to your credit report that will dramatically lower your credit score. Even if you pay off the collection, that information remains for years.
This can do damage well after you are beyond the repayment, including causing difficulties with acquiring credit, personal loans, business loans, car loans, home mortgages and other types of financing. You could even be entered into the ChexSystem database. If you end up in ChexSystem, you could be denied opening a bank account for several years. That's why it's best to use cash loans sparingly and pay them promptly.
Unlike most lenders, CashLoanSource.com can help protect you from falling into a debt trap when you simply need money for emergencies or a fast payday loan. Some lenders will not tell you that you have three options to pay for your cash loans. Most will only tell you of the first two.
Here are our three ways to repay!
Pay in full. One of the best ways to use a cash loan is to pay it in full by the date of maturity. This avoids extra fees from rolling it over to the next term and gets you free and clear to move forward. Plus, you'll build a good reputation with our lenders and be more likely to qualify for varying amounts in the future.
Pay finance fee only. This option is available for those who just can't pay the principal off by the maturity date. Perhaps you experienced an unexpected loss. You just need another week. Paying the fee only extends your time, but you still owe the principal.
*Pay finance fee and portion of principal. This payment method is not readily shared by some lenders out there. They want you to just pay the fee when the money comes due. Fees are free money to the lenders. All they're risking is your initial loan amount. Even if you have to roll your personal cash loan over to another term, you should try to pay a good portion of the principal back. This makes it easier for you to pay it off by the end of the next term to avoid paying more fees.
One of the mysteries about payday loans is their interest. Because interest is not stated specifically, the ordinary consumer doesn't know just how much interest they are paying. If they did, they might think twice about using payday loans. Interest is veiled in set fees per $100.
Payday loans can be advantageous if you pay them off during their initial term. They can help you cover an unexpected loss, pay off bills or provide money for emergency. On the flip side, rolling over the term by paying fee after fee for extensions means that you're really just paying more interest on the same amount. Here's an example.
Let's say you borrow $100 and the fee is $15. If you're not the most responsible person and decide that you need to roll over that loan payment five more times before you can pay it off, you'll end up paying $75 in fees to borrow $100. That equates to an effective APR of 780 percent! But if you repay the $100 within a week, you won't pay additional fees and you certainly won't face so much interest. It's important to weigh the potentially high interest rates against your reasons for wanting/needing a payday loan.
When you look to a personal cash loan as a possible option for emergency money, you must take great care to use payday cash responsibly. To abuse payday loans is to invite penalties that will put you in harm's way financially and the dent it puts in your wallet may not be filled for months.
First, depending on the length of repayment, you could face interest rates that can go anywhere from a couple of hundred percent up to, in some cases, thousands of percent. For example, if you are charged $17 for every $100 borrowed (typical fee), that amounts to almost 915 percent for a one-week loan, over 450 percent for two weeks or just over 200 percent for a one-month term.
What's worse than this? Extending or rolling over your personal loan. You can extend your loan period at the end of the term by just paying the fee again per $100. However, if you get into a habit of this, you could end up paying a lot more than the original amount back to the lender. By using extensions and rollovers, you're actually using money you could have used to pay off the loan to pay interest only. The original amount continues to remain.
Always pay on time. Delinquency in paying bills is one of the main ways that people harm their own credit report and credit score. While it is tempting to let bills slide for other purposes, in the end, you can affect your long-term credit standing. Others simply can't afford it, living paycheck to paycheck. A payday loan can help you out of this jam by giving you instant cash when you need it to stay on time with your payments.
Avoid collection. If you've let bills go delinquent and have done nothing about them for a while, you may be faced with a collection. This is a very bad mark to have on your credit report and it can dramatically lower your score. Plus, with the fees of a collection agency being high, using a payday loan to pay up those delinquent bills might just save you a lot of hassle.
Consolidate. If you can, get credit counseling or a consolidation loan to take care of your credit problems. If you can consolidate all of your bills into one monthly payment, it will be easier for you to plan your finances. And, even if you do have trouble making this one payment, use a loan until payday. You'll have three to four weeks to repay it before your next consolidated payment comes due.
While emergency cash loans can do a lot of things, including help pay off bills or cover an unexpected loss, they also carry with them certain fees. In weighing the option to take a cash advance, you should know that the finance charges behind fees are not always certain. Most companies will charge you a set fee per amount borrowed. For example, let's say you take out a $500 loan until payday to cover yourself for something unforeseen. The particular lender you deal with says that you have to pay $25 per $100 borrowed. That's $125 out of the $500, leaving you with $375 towards your immediate needs.
That also means that you'll be charged this for every payday that you delay paying the original loan back in full. This can amount to a huge APR if you let your loan drag on indefinitely, sometimes in the hundreds or thousands of percent!
In addition to these financing fees, you may also subject yourself to an additional “rollover fee” or late payment fee for continuing your loan beyond the due date. If the lender tries to debit your bank account for the money when promised and the money isn't there, you could subject yourself to further fees, including overdraft or insufficient funds fees from the bank, and open yourself up to potential credit harm.
|Jennifer Mathes, Ph.D.|