A payday loan, also called a
cash advance, is a type of short-term borrowing. It's a fast and
effective way to obtain a small sum of money (usually under
$500 loans) to meet regular expenses or unexpected emergencies. The
money is usually transferred to the borrower's checking
account, and the borrower writes a postdated check in the
amount he or she wishes to borrow plus some fees. The lender
holds onto the check and cashes it on the borrower's next
payday (hence the name).
Contrary to popular beliefs, payday loans are not ominous. The
industry is still very much alive and thriving. There are
millions of borrowers for whom these short-term loans are
proving as a boon.
The first time people took out a payday loan: 69 percent used
it to cover a recurring expense, such as utilities, credit
card bills, rent or mortgage payments, or food; 16 percent
dealt with an unexpected expense, such as a car repair or
emergency medical expense”, according to a
study by the Pew Trusts.
However, at times, few borrowers fail to pay the lender on the
agreed upon date, hence risk additional fees or penalties, or
even a lawsuit or wage garnishment (in case the court orders
in favor of the lender).
If you know the
right way to pay off payday loans, it’ll help you save money and avoid unwanted financial and
legal consequences.
As with any loan, a
short term installment loan
or
personal loan
based on your proven income takes dedication and discipline to
resolve (pay off), and many people can find themselves trapped
in a vicious cycle of trying to repay a loan of this kind due
to unforeseen circumstances or personal decisions that prevent
a potential resolution. This is not an uncommon situation, as
many borrowers at time find themselves unable to make a
payment or even becoming frustrated and giving up. We want to
try and dispel some potential myths and rumors that sometimes
surround short term personal installment loans, and why it is
in everyone’s best interest to pay off the loan as soon as is
possible.
Contrary to what you might believe, your lender is most
certainly not punishing you with extra fees and increased
interest rates in the occurrence of a missed payment or the
need to restructure the loan. The practice of fees for
restructuring is common throughout the small loan industry,
and has more than one purpose. First and foremost it is
necessary to cover the processing required to restructure a
loan. Secondarily, it is also meant as incentive to pay off
the original loan in the original time designated in the
terms. It is better for all involved primarily because if a
relationship between lender and borrower sours, then it is
unlikely future transactions will take place.
If you find yourself in such a position, contact your lender
and discuss your options. Avoiding contact with the lending
institution regarding a missed payment on your short term
installment loan is seen in the industry as an indicator that
the borrower will default. Even though you may incur higher
interest rates and additional fees, paying off the loan is
vastly better for your future credit, and it keeps you in good
standing with the lender should the need arise for another
short term
personal loan
down the road.
Understand the Basics of Payday Loans
Know The Business:
A payday loan or cash advance is one of the most convenient
small borrowing options. Interestingly, the
finance charges
associated are often much less compared to what a borrower
might pay in overdraft fees if he overdrew from his checking
account.
However, you face late fees and rollover rates if you fail to
repay the loan on time or the
loan term
needs an extension. The interest rates on payday loans are
often very high, and making delay in paying it back can be
tough to pay it back altogether.
Read The Fine Print:
It's critical to understand the terms and conditions of the
loan before you sign any financial agreement. Ignoring the
fine print can cause you to accrue massive debt and create a
complete mess unintentionally.
Ask Questions:
Your payday lender is always there to help if you have any
questions regarding the lending process or anything. It is
important that you borrow only after having all your doubts
cleared up so that you don’t inadvertently forget to pay off
your loan:
-
See if your loan is set up to renew automatically. Some
payday loans renew automatically and require the borrower to
make the payment before the first due date to end the cycle.
-
Know about any additional fees in advance. While some
lenders charge additional fees to deposit the amount in your
checking account electronically, some will charge if you're
given a prepaid debit card containing the loan amount.
-
If you've authorized the lender to withdraw funds from your
checking account, know when and how much the lender will
remove.
Pay off Your Loan
Paying back a payday loan by the next payday is nothing
unimaginable or outrageous. Careful planning can help you
avoid mistakes and ensure that the loan is paid off in due
time.
Plan To Pay Off The Loan By Your Next Payday:
Postpone any large and unnecessary purchases for the time
being. Make use of the borrowed money only for the reason you
took out the loan. If there is any surplus, keep it in the
checking account:
-
Make sure you got sufficient funds in your account on the
due date.
-
Stay in touch with the lender to make sure you have not
accrued any additional fees or charges.
-
Plan the mode of repayment in the beginning, and keep your
lender informed about it.
-
Many lenders let you pay off the loan early. But make sure
there is no early payoff fee.
Enter An Extended Payment Plan (EPP):
An EPP lets the borrowers extend the repayment period by
several weeks without any penalty. This is something very
comforting for many payday loan borrowers, as it enables them
to get their finances on track and provides enough time to
plan the payoff.
However, not every payday loan provider offers the EPP. There
are certain restrictions on Extended Payment Plans as well.
-
In order to request an EPP, you must visit the actual loan
producing office and sign an amendment to the original
loan agreement, thus agreeing to the new payment schedule.
-
Though there is no fee for an EPP, the lender may charge a
fee and accelerate the payment on the balance if the
borrower defaults on the EPP.
Consider Assistance From Local Programs Such As Churches Or
Charity Organizations:
These can be very helpful if you get behind in repaying your
short term personal installment loan. It should be noted that
it is highly unlikely you will receive cash from these
programs, but instead they would work directly with the lender
to see what options are available. Most of these organizations
can be found by doing an online search. Be prepared to answer
a lot of direct questions regarding your financial situation
and have paperwork handy to back up your claims.
Sell A Valuable:
This might be preferable to defaulting on a short term
personal installment loan. If you have antique dealers or pawn
shops where you live, consider paying them a visit and getting
your item appraised. If it turns out you can cover your loan,
or at least allow you to stay current on your payments, then
there is always the possibility you can redeem the item (at
least from the pawn shop) and resolve all issues. It’s not fun
to consider, especially if the item is a treasured family
heirloom, but the option should at least be considered for the
sake of preventing a default on a loan.
Ask A Family Member:
This is also an unpleasant prospect, but if you have
completely run out of options, consider asking a family member
for an advance, and promise to pay it off when you are able.
Finances between close friends and family members can become a
source of conflict or tension and it is understandable that
you might want to avoid such potential division. But as with
the potential item of value, staying current is better and
more cost beneficial to you than defaulting or missing a
payment. The decision must be yours, of course, but you might
actually find someone who understands what you’re going
through who is willing to help out. Remember, you can always
say “never mind” if you sense even the slightest amount of
discomfort in the other party.
Budget:
In the meantime, if you can anticipate the potential missed
payment of a short term personal installment loan, there are
preventative actions you can take to help avoid a missed
payment or default. The first is tightening the budget. Even
if you’ve already cut out potentially frivolous spending, take
a second look and see if there are additional cuts you can
make. Remember, this is a short term loan, so the cuts don’t
have to be permanent, just enough for you to grit your teeth
and ride out the tough times until you get things squared away
once again.
Cut Back On Bills:
Look at larger expenses such as utilities and look for ways to
cut back on energy use, the cable bill, or a service where you
can reduce monthly costs like the phone bill (For instance:
don’t turn the heater down, but on warm days, consider turning
the air conditioner off altogether, look through our blog for
articles about helpful tips on
simple ways to save money
or cutting costs).
Talk To A Credit Counselor:
Most states offer credit counseling programs free of charge,
and you may discover something you did not know before. These
programs are not designed to make you feel self-conscious or
guilty. In fact, they’re designed with the exact opposite
outcome in mind; giving you the much needed tools to get
yourself financially stabilized, back on your feet, or just
headed in a new direction with better credit.
Roll Over Your Loan:
Though rollovers on payday loans are not always allowed, in
some places you can do it (if the local and state laws
permit). Rolling over a loan gives you the necessary time to
amass funds required to pay off the loan. Being a borrower,
you're restricted to four rollovers or the state limit on a
single loan (whichever is less).
Limit the amount you borrow (what you need). Borrow what you
know you'll be able to pay back without any trouble using your
next paycheck, and by the next payday.
Pay back the
quick cash loan
amount plus the fees as soon as you can. Rolling over a loan
is never an ideal option. You simply keep on accruing more
debt by delaying the due date. Just for this reason, many
states have set limits or outright bans on rollovers.
Above all, make sure you do some research before you even take
out a short term installment or personal loan. Know your
options and your obligations ahead of time so you can make an
informed decision. As CASH 1 subscribes and abides by the
practices of responsible lending, so too do we encourage you
to borrow responsibly. Remember, your loan is based on the
information you provide, and your proven income. If everything
remains the same throughout the terms of your loan, there
should be no problem in repaying it. If you’ve got questions,
come see us online, or give us a call. One of our professional
loan specialists will be happy to answer any and all queries.