Getting A Payday Loan - Pros and Cons

A payday loan sounds appealing. You’ve probably heard or seen ads for them on local radio and TV stations. You get money you need now and pay it back later. Simple, right? Well, as you’ll see, payday loans - also called payroll advance loans or paycheck loans - can work in your favor. But, this kind of loan can also create problems for you if not handled correctly.

First, let’s look at how the payday loan process typically works:

* You visit the loan provider and complete a written application.
* The lender typically will require income verification (most recent paycheck stub) and a photo ID.
* If approved, you then sign the payday loan agreement and present a postdated check (your repayment) to the lender.
* The lender presents you with a check for the loan amount.
* The check you gave the lender is held for cashing on the agreed upon date (usually 2 weeks in the future).

So, with a payday loan you are essentially borrowing the money for immediate use, then repaying it (plus interest, which we’ll get to shortly) two weeks later. Besides the advantage of getting money you need right away, you’ve already presented the check to repay the loan, so you avoid having to remember to write and mail a check or make another trip to the payday loan office in two weeks’ time.

When used responsibly, payday loans are an effective way to manage cash flow. You can get cash immediately to pay for unexpected expenses (car trouble, injury, illness, etc.) - any of the things that can happen without warning. In the event that you experience any of these problems, having the option to get a payday advance loan can be incredibly helpful. When used sparingly and correctly, this type of money lending serves a vital and legitimate purpose. In fact, if you manage to repay the loan before its due date, you are entitled to receive partial reimbursement of the interest charged, making the cost of the loan very small.

However, there is a darker side to the payday loan industry. The biggest potential problem is how quickly interest on the loan builds up. Some who get payday loans cannot or do not pay them back within the agreed upon two weeks. The longer it takes to pay back the original loan amount (plus the interest built into that initial 2-week period), the higher the payback amount becomes.

As an example, let’s assume someone gets a $200 payday loan for two weeks. In most locations, there is no limit set by law on how much interest can be charged. Typically, you’ll be asked to pay back $230-$240, which is an interest rate of 400%-500% annually! Now, if you really need that $200 today, then adding $30 or $40 may seem like a good deal. But, if you cannot repay the loan within two weeks, the steep interest rate will quickly add up. You may well end up paying double or even triple the amount you initially borrowed.

As you can see, a payday loan can be a real lifesaver… and it can also get you into more financial trouble than it’s worth. Ultimately, you decide which way it goes. As long as you treat them as serious obligations, getting payday loans from time to time is not a bad move. Just be careful!

How To Get A Bad Credit Loan

Getting a loan when you have bad credit can be an excruciating experience. It’s tough, but not impossible, even during economic downturns when credit is not extended so freely. To navigate your way to an acceptable bad credit loan, it’s good to understand the different kinds of credit loans and which is most likely to be the type you can actually obtain. After reading this article, you’ll have a good grasp of the basics and a plan of attack to get the loan you need.

The Two Basic Types Of Loans

There are two broad categories of credit loans: secured and unsecured. A secured loan is one that is provided to you with the backing of collateral. Collateral is something you own that has value in the lender’s estimation. It can be your home, stocks and bonds, or certain types of property. Many bad credit loans require some form of collateral in order for the lender to agree to take the risk and loan money to you.

Unsecured loans are more common, and they are given on the basis of your good credit history and income level. As such, they are harder to obtain for people with bad credit. Harder, but not impossible, as you’ll see. Just be prepared to pay a high interest rate; it’s generally unavoidable if you have a bad credit rating.

How To Get An Unsecured Loan With Bad Credit

The key in attempting to get an unsecured bad credit loan is having a recent credit history that shows marked improvement. This means you need to plan ahead. For example, if you know your car is going to need replacing in a few months, start now to improve your credit score. Pay a little extra to reduce credit card balances or pay off your car faster. What these actions show a potential lender is your willingness to buckle down and work hard to rectify your bad credit situation. Such actions will not go unnoticed, especially if you find a lender who seems open to being convinced to take a chance with you.

The Benefits Of Shopping Around

Whichever type of loan you are able to get with a bad credit history, it pays to shop around before signing an agreement with a lender. Sometimes shopping around can save you hundreds or even thousands of dollars in interest rate charges. Time is on your side. If you can hold off for one or two extra months, your credit situation (and thus your appeal to lenders) will improve, as long as you make the effort to pay down your current credit balances. When you’re ready, you should apply for a loan at a minimum of three lending institutions before making a decision. You may be surprised by how big a difference there can be between the terms each lender is willing to offer.

Getting a bad credit loan will not be easy or fun. Accept that reality and set your mind to getting it done. The best thing you can do to increase your chances is show lenders that the bad times are behind you. Pay down credit card balances by cutting them up and paying more than the monthly minimum payments for at least a few months before you apply for a loan. Doing so will definitely improve the odds of finding a willing lender at reasonable terms.

• Borrow from $500 to $3,000 right now.
• Get an answer within 24 hours on larger personal loans.