How Payday Loans Work

Let’s have a recap first. Payday loans are short term, fast and hassle free loans that are the ideal solution for any unexpected shortage of money that may arise in your life. It can be a medical bill, a credit card bill, a loan installment, money to repair your car, fees payment or just a shopping deal that you cannot afford to lose out on. You can borrow $100 to $1500 via payday loans and it needs to be repaid by the next or subsequent paydays. Payday loans are the second name for convenient lending. So you can apply for it from just about anywhere. There are thousands of payday loan outlets around America and you can either walk into any one of those or apply online. The online payday loan industry has really boomed in the last few years. Log on to any search engine and search for payday loans to choose an online payday loan lender.

Criteria to be met

Most lenders have three requirements that will qualify anybody to receive a payday loan or a cash advance.

  • The person must be a US citizen and over 18 years of age.
  • He/she must be employed and make at least $1000 every month. ($800 every month if he/she receives the income via a government program like social security)
  • Must have an active savings or checking account with an American bank.

That sums it up. If you satisfy the above mentioned criteria, then you can qualify for a payday loan within minutes. There is no pre-approval verification or unwanted documentation. If you look closely, you will find that there is no credit check either. This is one of the biggest advantages of a payday loan over others forms of loan. It means the payday loan lender will never look at you as if you have the worst case of an extremely contagious disease called bad credit. You can get a loan irrespective of your credit score. Once you qualify, you will either receive a check for the amount or it will be credited directly into your checking account.

Repayment

Borrowing money is always great until you have to repay it. Payday loans have to be repaid by your next payday. Let’s say your payday is on the 10th of every month and you borrow on the 21st of the month. Then you have about 19 days to repay the loan plus an interest fee (about $15 on every $100 borrowed). You can arrange for the money to be debited directly from your checking account on the next payday. Or, you can give the lender a post dated check that will be cashed on the payday. If you are unable to make the payment on the next payday, it can be extended to subsequent paydays. But the interest rates will keep mounting and additional late payment charges will also come into the picture. Believe me, you don’t want to do that. Some other repayment options offered by most lenders are

  1. Repay the loan amount and roll ahead the interest charges to a separate loan.
  2. Repay the interest amount and part of the loan and roll the remaining amount to a separate loan.
  3. Pay only the interest charges and roll the entire loan amount to a separate loan.

But if you look at all these, you will notice something common. They all require you to borrow another loan. Now, unless you have another emergency requirement for money, why would you want to borrow another loan? So stick to your plan and repay it as soon as possible. Here’s a tip. If you find yourself in financial emergencies more often than not, then you need to go back to the drawing board and review your finances. Do not rely on payday loans as a long term solution for all your financial woes.

Payday Loans: A Better Solution For The Average American Worker

With the New Year upon us and Christmas bills starting to pile up, countless Americans are wondering how they will pay the bills and cover the taxes due in April. Payday loans are one solution to individuals feeling the crunch of bills and taxes. A cash advance will enable you to pay those bills and take care of impending circumstances without over-extending your credit cards or racking up non-sufficient fund fees. This source of fast cash is used by many Americans to eliminate the long-term high cost of credit card interest rates while providing an instant cash solution for their pressing needs.

Why would you consider a payday loan? That is the question many American workers ask when they are looking for a solution to their bills, and unfortunately, those working class individuals without pristine credit are shut out of traditional options like low interest rate credit cards and home equity lines. The payday cash loan has become a practical option for individuals experiencing a financial emergency.

To meet the requirements for a payday loan, most cash advance services require you to meet a few qualifications. First, you need to be at least 18 years of age and a United States citizen. Second, you need to have a job or be able to show that you receive some kind of regular income, which brings in at least $1000 each month. Third, you must have a checking account (a few will qualify you with a savings account) to finalize the transaction. Some companies will include additional requirements, but these are the most common prerequisites to obtain a payday advance. If you meet these conditions, you generally have to fill out the company’s online form to find out how much you will qualify to receive. They, like nearly all lending institutions, will gauge the amount you may borrow by the amount of your income, although, unlike most lending institutions, these companies are much more lenient in their lending practices. In general, the majority of the online payday advance companies do not disqualify you because of bad credit, bankruptcy history, or prior bad checks.

There are no long lines and no long delays while the company reviews your application. In addition, this process takes place in the comfort of your own home or office, not the cold atmosphere of a bank. Most companies have a relatively simple and quick online form for you to fill out, and once your loan is approved and you speak with a representative, the company deposits cash directly into your bank account. Make sure you review the website completely, and read the details. Do you find the fees fair, and are the terms acceptable?

In order to receive a cash advance, companies require you to have a bank account because when it is time to pay back the loan, the company will simply deduct the principle and fees from your account during your next pay period unless you ask for an extension. Now the fees seem extremely high for this service unless you do the math on how much it will cost you not to take the short-term loan. What did you pay for your last bounced check? Most banks charge between $25-$35, and often times merchants charge a matching fee. The expense of a payday loan does not sound nearly as bad once you consider the bank charges and credit reporting that takes place when you bounce a check. If your credit card company were going to charge you a $29 late fee and raise your interest rate, wouldn’t you be better served to take an advance on your paycheck rather than take the long-term consequences of higher interest rates? Of course, there are payday loan companies that are out there to take advantage of unsuspecting consumers, and that is why you must do your homework and make sure the fees and terms are acceptable.

Lately, many news articles have criticized the payday loan industry, yet these same reporters have not questioned the excessive fees and interest rates charged by traditional lending institutions. Obviously, it is in the best interest of banks and credit card companies if consumers continue to accept their Machiavellian policies (remember Machiavelli advocated deceit to gain and maintain power). Non-traditional lending companies challenge this totalitarian authority and give the working class another option besides paying outrageous credit card fees, bank fees, and unwarranted interest rates.

Personal Loan After Bankruptcy: Can You Qualify?

If you want to qualify for a personal loan after bankruptcy there are four key areas that will determine how successful you are:

1) Your credit score

2) Collateral

3) Existing debt

4) Time

Let’s look at each factor in more detail and how they can help you increase your chances of qualifying for a personal loan after bankruptcy:

1) Credit score: In order to qualify for a personal loan after bankruptcy you will need to meet the lender’s minimum credit score criteria, provided the lender extends loans to individuals with a recent bankruptcy. You’ll want to find out before applying for a loan: Simply ask the lender if they consider applicants with a bankruptcy on their credit report.

Let’s suppose the lender does. How can you increase your credit score enough to qualify for a personal loan after bankruptcy?

The first step is to order copies of your credit reports from the three major credit reporting agencies (Experian, Equifax, and Trans Union). Next, make sure any inaccurate or obsolete negative information on your credit reports is removed or updated. I go into detail on this in After Bankruptcy Credit Solutions. I also explain how to legally add positive lines of credit to your credit reports, which is a very powerful way to increase your credit score – but I’ll save that for another article.

2) Collateral: Another major factor in obtaining a personal loan after bankruptcy is how much collateral you have. Why? Because if a lender has collateral that they can go after (i.e., equity in your home) should you default on the loan, that reduces their risk dramatically. So if you can provide collateral to the lender, it can increase your chances of qualifying for a personal loan after bankruptcy.

3) Existing debt: You don’t want to have too much debt when you apply for a personal loan after bankruptcy. If you do, the lender may feel you don’t have the capacity (enough income) to cover the loan payment, because you have too many other monthly expenses to pay (i.e., credit cards, auto payment, etc.) – as a result you could get turned for a personal loan after bankruptcy.

On that note, find out if the lender has a minimum income requirement, or debt-to-income ratio you need to meet. If they do, make sure you meet their minimum requirement before you apply for the loan.

4) Time: It’s been said that “time heals all wounds” – well, when it comes to obtaining a personal loan after bankruptcy this can certainly be true if you’ve developed a positive payment history since your bankruptcy.

When a lender is deciding whether or not to extend you a personal loan after bankruptcy, your credit report will play a major role. Generally speaking, if your credit report reflects a positive payment history for at least two years since your bankruptcy, it will certainly help.

We have looked at the four major factors that will determine whether or not you qualify for a personal loan after bankruptcy: Your credit score, collateral, existing debt, and time. To the extent you can strengthen each one of these you increase your chances of being approved for a personal loan after bankruptcy.

Even if you can’t qualify for a personal loan after bankruptcy immediately, don’t be discouraged! Remember, time can heal all wounds when it comes to qualifying for a personal loan after bankruptcy. Just make sure to focus on increasing your credit score, pay your existing bills on time, don’t take on too much debt, and build up your net worth.

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