Becoming A Responsible Homeowner

Tips For Using A Payday Advance To Solve A Financial Crises

The short term loan known as the payday advance, or the payday loan, is often maligned by people in the financial industry. This is due in some part to the way that a few payday lenders market their business, but mostly it is due to a lack of understanding regarding the actual loan process and purpose. Payday loans have often been used as a quick way to have money before payday, especially when there is an emergency situation. If you need a quick influx of cash to help you reach your next payday, there are two tips to keep in mind.

Know The Payday Lending Laws For Your State

The laws for micro-lending, another term for extremely short term loans such as a payday loan, vary from one state to another. Some states, such as North Carolina, have banned them entirely. Other states, such as Texas, do not have many specific limitations on how much can be borrowed and to what extent borrowing may occur.

The loan itself is usually meant to be repaid by your next pay period. This factor is how the loan gets its name. If the loan cannot be repaid in full at that time, some states allow for a concept known as rollover to occur. If your loan rolls over to the next period, say another 14 - 30 days depending on the original loan, interest and fees can be added. This is where many people begin to get into trouble. The amount of money that will be owed has the capacity to greatly increase the overall debt. The exact amount that the debt will increase will be determined by state laws and the contract signed by the borrower.

One thing to be aware of is the fact that most states disallow criminal action against the borrower if they default on a payday loan, barring certain specific scenarios. For instance, Alabama will only allow a loan company to bring criminal charges on a borrower if they tried to pay with a knowingly fraudulent check, such as a check written with the intent to draw from a closed account. If a payday loan lender lends you money in a state where criminal action is not allowed, you can ignore them or even report them to various consumer advocacy groups.

Only Take Out A Payday Loan if You Truly Need One

Payday loans are incredibly easy to acquire. In most cases all you need for the process to take place is a bank account, proof of employment, and proof of identity. There is rarely a credit check involved. This ease of acquisition is great during a financial emergency, but can be disastrous at other times. The key is to only take out a loan for the exact amount that you need, and only if you absolutely need it.

A good example to use would be someone who has no money and possibly no access to a credit card, but has to have their car repaired in order to get to work. Before taking out a loan they should consider all options. Can a friend or family member take them to work until payday? Do they have any savings at all? If nothing else, can they pawn something worth enough money to cover the costs of repairs? If all alternatives are exhausted, a payday loan can be a godsend. If any other option is available, that alternative should be considered first.

The reason that a payday loan is considered to be highly useful but a last resort, is the high interest rates involved in the practice. If you live in a state that disallows rollovers, it might not be as problematic, but some states allow for several of them and multiple loans at the same time. Nevada for instance, allows a borrower to borrow up to 25% of their gross monthly income and they have an unspecified interest rate allowance. Though, if the borrower defaults on the loan the rate of interest afterward can only be up to 10% higher than the prime rate used by the largest Nevada state bank.

If you have a need to borrow money quickly, a payday loan can provide you with a great opportunity. If you know the laws and only take out a loan that you need, when you need it, you can use this method to solve many short-term minor financial issues. For more information, contact a company like Payday Express.