Payday advance

These payday loans are short term loans meant for salaried-class people only. The formalities to be complied with, for obtaining the loan are very liberal and the loan can be got sanctioned within a matter of a few hours. Now a days, many companies are not insisting for post dated bank checks as collateral security. A Judicious use of the above facility will save the face of the borrower during the periods of extreme financial difficulties.

A payday loan is a clean loan availed on the strength of personal post-dated bank check, which has to be repaid on the day of salary. Hence, the period of repayment is very short, say about 20-30 days and quantum of loan is also very less, because, it has to be repaid in full, in one shot. Now a days many companies have dispensed with the practice of obtaining bank check.

There are many financial institutions and financial companies, who are prepared to lend money to such small borrowers for a short period. The exact reason behind it is, that though, they are unsecured advances they can easily be recovered, and such loans will never go sticky under ordinary circumstances.

Generally, these loans are disbursed on the security of postdated bank checks; however some of the companies have given up insisting for credit checks also. Many pay day loan companies and their agents advertise in the Internet, about the facilities extended by their company or by their principals.

Sanction within hours, say from 2hrs to 24hrs.

For example, the following type of advertisements can be seen in the Internet-

X & Co. Loans online says,* -

Hassle free payday loans will be approved for any purpose, without insisting for credit checks. On line applications for payday loan will be processed in 3 minutes and cash will be sent through wire to the bank Account immediately.

XX & Co. On line agents for Payday loan company says*-

We will show you where to find easy Payday loans and advances upto$1500, approved within 24 hours.

XXX & Co. online agents for payday loans says*-

We connect you with payday loan up to $1500. on line- approval within 24hrs.

(*Names of the companies are changed)

Like wise, there are number of companies offering the above facility at competitive rates of interest and easy terms.

There are both advantages and dis-advantages in going for a payday loan.

Dis-advantage.

Major dis-advantage of payday loan is, that the entire amount of the loan is to be repaid in one lump sum on the very next salary day without fail; hence, taking of pay day loan will only, transfer the budgetary deficiency from this month to the next month. Again for the next month, we have to approach the same financier or some other financier and raise another loan to cover the deficiency for that month. In the above manner this will become a perpetual problem spread over to different months, and we will be making the financier rich by paying him interest every month.

Advantages.

In the absence of payday loan, or any other immediate sources of assistance, for all our emergency financial requirements we have to approach our friends or relatives for a hand loans. Generally, no friend or relative will be very much enthusiastic to part with his hard earned money whether it is in the form of loan or in the form of charity, and naturally he or she will plead some excuse and avoid us. This will add insult to injury and serves no purpose to us. Even though we pay some amount towards interest, it is always better to approach a financial institution for our financial requirements, rather than to approach a friend or relative and get insulted.

Depending on payday loans is not at all advisable. A person must use this facility as a stop-gap arrangement only. That is, when certain amount is due to a person, and the same is delayed, and in the meanwhile some emergency arises, then he can avail payday loan and see that the emergency is cleared. Now, in the second stage, he has to utilize the amount due to him and clear off the payday loan in one shot. In other words the payday loans must be availed as a last resort when there is no other way out.

Now, consider a case wherein an emergency arises for a person to whom no amount is due from any quarter. In such cases he has to solve the situation in phased manner.

In the first phase he will borrow, immediately available payday loan; and utilize the same to tide over emergency situation. Next, in the second phase of action, he will approach his Credit Union for a loan, or obtain a pay advance from your employer, or approach a bank or a good financial institution and avail a medium term loan repayable in 20-30 months, with affordable monthly installments, and see that payday loan is cleared in full out of his new loan.

This will help the borrower in two ways, in the first instance, he will be clearing the payday loan on time without giving any scope to pay any penalty towards delayed payment, and secondly he will be left with a substantial amount as residual excess out of the new loan availed.

Under such situation, he must exercise ut-most restraint over his wants and try to safeguard the residual excess amount saved out of proceeds of new loan and must use it, only for future emergencies, without frittering away the saved money.

Lets see what Federal Trade Commission For the Consumer- FTC- Consumer alert, says in this matter of payday loans.

It says-

While disbursing payday loans the total APR (Loan fee, Interest, and other types of credit costs) will be deducted out of the proceeds of the loan and only net amount will be disbursed.

Whenever a borrower requests for a renewal or rollover for an additional period of 2-3 weeks, again an additional fees is charged.

If a borrower roll twice the rate of interest will come to 36 to 48%.

It also says-

Try to get financial assistance from Credit Union, pay advance from your employer, or a loan from friends or relatives, in case you fail to procure the loan from any of these sources then go for payday loan.

It advices-

Know the details of the transaction first- Rate of interest, loan fee, penalty in case of request for rollover etc.

Compare the APRs of different companies and select an appropriate company to deal with, etc.

Conclusion.

As the saying goes, Cut the coat according to cloth one should try to limit his expenses within his means and try to live peacefully without getting into clutches of a money lenders. Anyway, emergencies will arise, and we may be forced to go in for a loan, on such occasions we must think twice and must be very careful in selecting our future course of action.

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