How to plan for payday loans

Payday loans to overcome financial traps

11:01 01 May 2013

There is a very strong argument that today’s payday loans are modernized versions of loan sharks, just more stealth with the help of the internet. The concept of having funds available for any reason at the end of the phone call or internet connection is extremely tempting. With the recent financial turmoil, these alternative sources have operated with minimal regulations until now.

 

One of the biggest concerns with individuals and payday loans is whether the borrower can afford the full package of the loan. Seeing the loan amount in large, bold print is one thing but the actual terms and conditions for the loan package remains in regular type and print, making it easier to be overlooked. Borrower need to differentiate between something truly “needed” or that is simply “wanted.” 

 

• Ask yourself if this bill or expense really “needs” to be addressed today or can truly wait till the next pay check?

 

• Evaluate the payday loans company to see what their practices are as well as their customer and service rating. As with anything, if it sounds too good to be true, it probably is.

 

• It is an expensive loan! The amount you need to pay back, with interest and other fees can be 2 ½ to 4 times the amount being borrowed after all is said and done. This is what is in the regular type or print that often gets overlooked.

 

• Are there any collateral items such as cars, boats, etc. tied to the loan? Are they holding the title or ownership papers until the loan is paid? Even if a single payment is missed, they can claim that item for repayment.

 

• Realize the timeline or term for the loan. Is it really expected to be paid in two pay checks or is it spread out over several checks or months, which makes it much more expensive. Realize that anything can occur within the term of the payday loan. How will this affect future payments or the total amount to be paid?  Are you able to negotiate the terms after a few payments should your situation change?

 

Payday loans, as stated in their ads, are truly temporary fixes and not long term solutions. Having more than one can not only put you in a more tenuous situation, it may also be illegal.