Quick Guide to Payday Loans

In the wake of COVID-19 shutdowns, many Americans are struggling to make ends meet. Federal resources have done little to help families and individuals pay their rent and other expenses following skyrocketing unemployment. As a result, many people are turning to other sources for financial assistance.

If you’re looking for a short-term quick infusion of cash, a payday loan can sound appealing. However, experts warn, payday loans are rarely a good option. Payday lenders are often predatory; so much so that some states have banned payday loans altogether. Here’s what you need to know about payday loans before you get involved.

What is a payday loan?

Payday loans are high-cost, short-term loans for around $300 that are meant to be repaid with your next paycheck. They’re offered through payday lenders like MoneyKey, Check Into Cash, and Ace Cash Express that operate out of storefronts and online. To qualify, you need to have income and a bank account – that’s it. Because of these low requirements, payday loans are appealing to those with bad or nonexistent credit.

When you ask for a payday loan, the process takes as little as 15 minutes to complete. The lender will confirm your income and checking account information, and give you cash on the spot or an electronic transfer by the following morning. In exchange, you must give the lender a signed check or permission to withdraw money electronically from your bank account. These short-term payday loans are due immediately following your next payday: two weeks to a month from the day the loan is issued.

To repay the loan, the lender will schedule an appointment for you to come back to the storefront and repay when the loan is due. “If you don’t show up, the lender will run the check or withdrawal for the loan amount plus interest. Online lenders will initiate an electronic withdrawal,” describes NerdWallet.

The danger of payday loans

Payday loans may seem straightforward, but they rarely are. “Payday loans come with a finance charge, which is typically based on your loan amount. Because payday loans have such short repayment terms, these costs translate to a steep APR [annual percentage rate]. According to the Consumer Federation of America, payday loan APRs are usually 400% or more,” reports Experian.

High interest rates are a given with a payday loan. Pretend you need a loan of $100 for a two-week payday loan. The lender charges you a $15 fee for every $100 borrowed – a 15% interest rate. Since you have to repay the loan in two weeks, the 15% charge equates to an APR of almost 400%. On a two-week loan, the daily interest cost is $1.07. Project that expense out over the full year: borrowing $100 would cost you $391.

Furthermore, it’s common for people who take a payday loan to get locked into a vicious cycle. “The problem is that the borrower usually needs to take another payday loan to pay off the first one. The whole reason for taking the first payday loan was that they didn’t have the money for an emergency need. Since regular earnings will be consumed by regular expenses, they won’t be any better off in two weeks,” says one expert.

What to do if you already have a payday loan

Individuals stuck in a payday loan may start to feel desperate as the expenses pile up. Can you go to jail for not paying back a payday loan? Can payday loans sue you? Is there a way to get out of payday loans legally?

If you’re in a situation where you can’t repay the loan, a payday lender will continue to withdraw money from your account, sometimes taking smaller repayment amounts to increase the chance that the payment will go through. Lenders may also try to negotiate a settlement with you for the money owed. It’s also possible that a lender will outsource the loan to a debt collector – who is able to file a civil lawsuit.

“Failure to repay a loan is not a criminal offense. In fact, it’s illegal for a lender to threaten a borrower with arrest or jail. Nonetheless, some payday lenders have succeeded in using bad-check laws to file criminal complaints against borrowers, with judges erroneously rubber-stamping the complaints,” explained NerdWallet.

If you’re looking to get out of payday loans legally, there are a few options. Look into debt consolidation loans, peer-to-peer loans, or debt settlement. Speak to a lawyer or a financial expert to figure out what your options are – but above all, don’t sacrifice food on your table to pay for a payday loan.

This article is contributed by LiftRocket.

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Using Technology to Improve Finances and Decrease Debt

Financial difficulty is, unfortunately, a very prevalent part of everyday life for many people. For example, about 69% of Americans have less than $1000 in savings, which limits their access to funds needed to pay for emergency car repairs or an expensive visit to the emergency room. Due to the lack of financial stability within society, many individuals fear the future regarding their ability to provide for themselves and their loved ones if the need arises.

Debt is also another major influence on people’s financial situation. Researchers at Lending Tree found that the average credit card debt of American households stands at about $5,700. This can inevitably lead to lower credit scores and restrictions on people’s monthly budgets.

Fortunately, there’s no shortage of available means to improve the use of our money and time, allowing individuals to tackle their debt and properly prepare themselves for the future. With new technology being developed and improved every day, financial technology, also known as “FinTech”, is playing a major role in this as well, and giving more people than ever the means to become more financially savvy.

Here are some suggestions on what tech to include in your budget, as well as apps, extensions, and other tech tips to aid you in your goals to decrease debt and improve your finances.

Use Your Phone to Find Apps and Information

Smartphones today allow access to more information than any user could ever imagine. From the plethora of apps and industries to choose from, one person can access virtually anything. Via phone, you can download apps to help save you money and time, manage your budget, and even make money on-the-go.

You can also use your smartphone for its original purpose, which is to gain access to the internet’s library of information! From financial advice blogs to digital financial advisors, there’s no shortage of information you can find. Thanks to smartphones, you can now learn about debt, your credit score, money-saving habits, and more, all from the little device in your pocket.

Take Your Savings Digital

As new tech becomes more integrated into people’s daily lives, businesses are taking notice and using technology to improve user experience. This is especially true in the world of financial institutions, where banks are now able to operate almost entirely online while reducing or eliminating unnecessary fees. By doing so, they’re making way for customers to save more money for an easier budgeting experience, to properly create an emergency fund, and to pay off debt.

The second is that mobile banks provide apps that are more easily accessible to users, which

allows for enhanced perks and offers. Many traditional banks require credit score checks before signing up, putting limits on who can have access to banking. This can be difficult for people struggling with debt. However, online banking platforms are now paving the way for access to a checking account without a credit report. Taking advantage of this feature can be a great way for people with low credit scores to start putting money into a savings account.

Work a Side Hustle

Though it may seem like a lot to handle with other life tasks, a side hustle could not only provide an increase to your current income, but the right pick could transform into a valuable asset for your future. Side hustles that you can commit to from your smartphone range anywhere from ridesharing, to room sharing, grocery shopping, and even taking surveys.

These types of side hustles are what provide great supplemental income, and can be used for a variety of purposes, such as paying off larger amounts of your credit card debt or growing your savings account to prevent future debt. Other side jobs could eventually turn into long-term, and even full-time work: blogging, being an internet influencer, and digital freelance work, all have a great potential to grow into bigger sources of income in your future.

Make Use of Budgeting Apps

Because budgeting can become a complicated, tedious task, many apps have been released to aid the consumer in their venture. Consider budgeting apps that are free or require a low monthly subscription to get started. The fee-free apps will offer simpler options and make it easier to start your budget. Others to consider are shopping apps; most shopping apps were created with the sole purpose of finding deals, coupons, and other ways to save money both online and in-store. Taking advantage of them will also save you time and decrease stress, especially because you didn’t waste time searching for coupons yourself.

Rely on Chrome Extensions

Google Chrome is the most popular search engine today, which means there are a variety of resources to help you save money and accomplish other tasks. Utilizing extensions can save you the stress of having to seek out deals on your own, especially while shopping online. For example, one extension called Honey allows you to shop, and then at check out, automatically searches for promo codes that save you money. On top of this, there are plenty of other extensions available to choose from.

Though a few cents may seem like a marginal difference, over the course of a month, those few cents will turn into more cash that you may have missed otherwise. Reallocating this money towards your monthly budget gives your wallet some breathing room, and can give you the means to pay off those credit cards that have been weighing you down.

No matter your decision of which gadget, app, or software to use, remember that you are in charge of your future. You can make the choices necessary to manage your finances now so you’re more comfortable and well-off down the road. Because of all the information and opportunities presented to us today, there are limitless possibilities on how to save money, manage your finances, and decrease any debt that has taken over your life.

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