Pitfalls of Payday Loans ? AIFSEXPO.COM

Advantages and disadvantages of payday loan

A payday loan or cash advance is a small short-term financial instrument that allows a borrower to cover its expenses until the next paycheck. Generally, the amounts of these loans range from 100 to 1500 in 10-14 days term and have interest rates high enough to 390-900 percent. Payday loan is regulated at the state level ? each state has its own laws regarding payday loans. Meanwhile, the U.S. Congress passed a law in October 2006 that limits lending to military personnel at 36% in April, the Department of Defense was concerned that payday lenders could cause financial problems for the soldiers and even endanger security clearances.Some federal regulators of banks are trying to limit or prohibit payday loans not only for military personnel, but for all customers. The high interest rates are considered as a financial blow for the people of the lower and middle class who are the primary borrowers. Lenders show that payday loans bad credit are often the only way to have money available for customers with bad credit history or can not get another alternative low rate of interest, such as a bank loan or a credit card. In turn, critics say that the majority of borrowers are in a worse financial situation when they are forced to repay their loans. Many of them remain trapped in a cycle of debt not guaranteed. Statistics compiled by the Center for Responsible Lending show that the majority of profit for payday loans come from the most loyal consumers who can not repay the loan before the due date and instead extend their loans, paying more in taxes every time.

Retail loan

Customers come to shop payday loan and qualify for a cash advance small in the range from 100 to 500 with the borrower?s next salary payment. Since the rates of loan, the customer will pay 15-30 per 100 borrowed for 14 days period, which translates into interest rates of 390-780 per cent. At the maturity date the borrower returns the loan shop payday and writes a check for his lender in the full payment in advance plus expenses. If the borrower does not repay the loan, the lender can control the traditional process, or through electronic withdrawal from the borrower?s bank account. If there is enough money to cover the check to the bank account, the customer will face extra costs from its bank, plus all costs of the loan. Meanwhile, most payday lenders offer the extension of the payment plan at no additional cost for customers who can not pay their loans, the expiration date. In several states, like Washington, extended payment plans are required by state law.

Internet loan

You can get a payday loan, not only from the store loan payday, but online through special lending websites. Typically, a customer fill out a simple application form online, which means he or she requested personal and bank account information, Social Security number and employer information. Some lenders require a fax copy of a check, a recent bank statement, and signed paperwork. After the immediate approval of the loan amount is directly deposited into the borrower?s bank account. On the loan payment due date with taxes is electronically withdrawn from the account of the borrower.

Examples

For example, a borrower wants to obtain a payday loan. The borrower will have a post-dated check for 500 to 570 personnel to borrow up to two weeks. The payday lender agrees to hold the check until the date of the borrower?s next paycheck. At that time, the borrower has the option to redeem the check by paying 570 in cash, or renew his loan to pay off the 570 and then immediately ask for a further loan of 500, as a result extend the loan for another period of 14 days . However, in many states to extend for payday loans is not permitted by state law. In states where there is a deferred payment plan, the borrower may choose to opt for a payment plan.

The Consumer Federation of America conducted a survey of hundreds of websites payday loan recently. The results showed that these lenders offer loans from 100 to 1,500, with 500 the most frequently offered. Finance charges ranged from 10 to 100 up to 30 per 100 borrowed. The most frequent rate was 25 per 100, or 650% annual interest rate (APR) if loan payday is repaid within 14 days.

Source: http://aifsexpo.com/?p=278

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