In a perfect financial world, everyone would be able to walk into their neighborhood bank or credit union, sit down with their friendly banker, and get the personal loan they need without any hassles or problems. The process would be quick and easy and in a matter of just a few minutes another satisfied customer would have the money they need.
Well, welcome to the real world! Today only those consumers with extremely good credit histories and high credit scores are able to qualify for low-interest personal loans from a traditional lending institution. Even the once-popular home equity loan is practically a thing of the past since so many homeowners now have mortgages that are either equal to the appraised value of their home (somewhat good news) or are underwater with their mortgages meaning they owe more on their home than the property is actually worth (not so good news).
Unfortunately when financial emergencies occur, most people don't have the luxury of waiting days or weeks to find out if they can qualify for a traditional personal loan. If you are suddenly faced with an emergency medical situation or an unexpected car repair or having your electricity shut off, these situations probably won't allow you to calmly twiddle your thumbs and see what happens with the bank loan application.
This is when a payday advance loan can really help! Look at the advantages of this type of loan:
- Simple, quick application process. Whether you visit an actual payday advance loan storefront or use one of their secure websites, the loan application is easy to understand and can usually be completed in just a few minutes. You will need to provide some basic personal information such as your name, address, social security number, phone number, and proof of employment/income. Once you submit your application, the approval process normally only takes a minute or two.
- Fast access to cash funds. The proceeds from your approved loan amount are generally transferred to your checking account within one business day. Some, but not all, lenders do offer one-hour transfer times but you will pay an extra fee for this expedited service.
- No bounced check or disconnect service fees. If you are in danger of bouncing checks or having your utility services interrupted, a payday advance loan can give you the funds you need to avoid these charges quickly and safely.
It might interest you to know that many major banks are now more or less in the payday loan business. Here are some of the names by which these loans are called and the banks who offer them:
- Ready Advance - Regions Bank
- Checking Account Advance - US Bank
- Direct Deposit Advance - Wells Fargo
- Early Access Now - Fifth Third Bank
So if you have ever used one of these loans from one of these banks, you basically have already successfully received and repaid a payday advance loan.
Think Carefully Before Using a Payday Advance Loan
A payday advance loan can be the perfect financial tool to help you deal responsibly with an unplanned money emergency. But it does have its own risks as well as rewards. Anytime you borrow money (add to your debt) it is a serious responsibility. The lender has the expectation that you will repay the loan in a timely manner. You, the borrower, sign a legal contract stating that you will do just that.
There are some very important aspects of a payday advance loan which you should be aware of and fully understand before committing to one. These are:
- A payday advance loan is a short-term loan. This means that you will be required to fully repay the loan amount plus interest and any fees within a very short period of time- usually just two weeks.
- The Annual Percentage Rate is extremely high. Most payday advance loan lenders charge around $10-$15 per $100 borrowed. This can translate to APRs of anywhere from 500%- 1000% depending on the specific lender.
- Loan extensions are not advisable. If you decide to use a payday advance loan, you need to be certain that you can repay the entire amount due (loan amount, fees, and interest) on or before the agreed upon date. Some states expressly forbid payday advance lenders from offering loan extensions. Other lenders simply don't allow them for their customers. If a loan extension is offered and you are forced to take one you can expect to have additional fees and interest charges added to what you already owe.
If these terms seem harsh to you it's because they are. But the following statistics may put things in perspective a bit:
- The typical late fees and reconnect charges which a utility company routinely charges, if annualized into an APR, would be almost 1300%.
- If a typical late fee on a credit card account were stated as an annual percentage rate, that APR would be more than 700%.
- If the bounced check fee that most banks assess its customers were expressed as an APR, the interest rate would be almost 1000%.
So while opponents of payday advance loans always make the argument that the interest rates offered are astronomically high, the facts show that many companies and financial institutions also charge exorbitant fees and interest. They just don't advertise it so plainly.
Smart consumers understand the risks of payday advance loans. But they also appreciate the fact that when money is tight and you need $100 to responsibly take care of a pressing financial matter, 10 or 15 extra dollars isn't a big price to pay. You just have to be prepared to fully repay the amount you owe when it is due.