Ara Betty is a freelance financial writer and speaker about personal financing. She helps people realize their goals on becoming debt free with the use of debt consolidation. She hopes to expand her knowledge more about loans and debt to be able to write a book.
In this article, you can find information on what is a payday loan, when and how it should be used, the dangers that usually come with it. You will also learn what is a payday loan debt, a payday loan debt settlement and when is the right time to get one. In addition, you will find useful information on how to stay out of unnecessary trouble in the future and maintain a good financial situation.
When can a payday loan be useful?
For everybody comes a time when things get very complicated financially. There are many reasons that can bring you down – you can get sick, lose your job or a beloved one. After such tragedies when the time comes for you to pay your bills, you might find it impossible to manage them at the moment. The situation is overwhelming. However, there is a way out- a payday loan. It is quick, cheap and has almost no requirements. You can get it any time, even on the Internet. A payday loan is a fast and easy solution to a bad situation.
What is the problem with payday loans?
In some cases, payday loan turns a relatively small problem into a very big one. How does that happen? It is like an avalanche. You take one loan to cover one debt and then another loan to pay back the first one. However, this payday loan circle can continue forever. It means that you will never be out of debt. Another thing is that payday loans have extremely high-interest rates and in most cases penalties payments as well. Consequently, if you do not repay your payday loan during the first payday period, it is going to be growing rapidly. If you reach that point where you have multiple overdue payday loans, you might find it very hard to deal it. However, there is a way out of this situation and it is payday loan consolidation.
What should you know about payday loans?
First of all, a payday loan is an unsecured kind of loan. There are two types of loans in general – secured and unsecured ones. Unsecured loans hide a higher risk for the borrower. For that reason creditors are more persistent when it comes time to collect what is owed to them. It should be noted that payday loans remain unsecured even if they are linked to your wage. Meaning, in some cases, your wage can be used by the creditor for the repayment of the debt but even in those cases, the loan would not be considered secured. A classic example of secured loans are mortgages.
Second, payday loans are short-term loans. That means you are supposed to repay relatively fast in comparison to a mortgage which can go up to twenty years ahead in time. With payday loans, you usually have few months to pay back. Otherwise, penalties come into force.
Payday loan has many other names. It is also known as a short-term installment loan, payday advance, salary loan, payroll loan, small dollar loan, short-term advance loan, cash advance loan. All of those give you little bit more information about what the essence of this loan is. It is meant to cover everyday expenses for a short period of time after which you have to repay it.
You should know that litigation on payday loans vary within the country. The regulations are different in each State. There are even some jurisdictions that have forbidden payday loans entirely. That means it will be illegal for people or organizations there to provide such a loan. Be careful and check your State regulations in detail. It might take some time and reading but it saves further troubles in the future. If you are not sure you can do it on your own, you might consider consulting a professional. There are many different approaches to payday loan regulations. Some jurisdictions have very few restrictions on payday lenders, while others have imposed limitations on the annual percentage rate (APR) in order to prevent it from being misused. Payday loans are normally regulated by the Uniform Small Loans Law (USLL).
How to calculate annual percentage rate?
Payday loans have many downfalls. However, among the worst of them is their percentage rate. There are many different ways to calculate the payday loan percentage rate. When there is a restriction in order, the norm is between 36 and 40 percent. However, in some cases, you can see numbers such as 391 % varying up to 3733% or even more. This can be a problem. In addition, it is hard for an average person to do the math. Especially when the current financial situation requires a fast solution, there is rarely enough time to think things through. The pressing need of money makes it hard for a person to foresee the outcome.
A payday loan is very tempting when you are faced with a financial crisis. However, you should be aware it does not come without a risk. Although when used correctly it can be harmless, that is rarely the case with this kind of loan.
Interestingly enough though there are some studies that show that payday loans do not carry a more long-term risk for you than other forms of credit. That is of course after you deal with the huge short-term trouble they cause. To achieve that you need to find an appropriate payday loan consolidation service. It is the payday loan consolidation company that can help solve any problems resulting from taking a payday loan and falling into a huge payday loan debt. It is the best solution out of the complicated situation.
How to use payday loans correctly?
If you have a good budget plan and some reasonable amount of savings, you are not supposed to ever need a payday loan. However, everybody has hardships from time to time. Regardless whether you are usually very organized and plan ahead you finances or you just seem to be unable to get a hold of your financial situation, there will always be a solution for you. It might not always be very easy but eventually, you will get out of any trouble.
When you start having a bit of a rough time with your daily expenses, you can get a payday loan and cover them. If you for some reason do not manage to repay that payday loan, there will always be a payday loan consolidation company. People working there will be more than happy to cope with your situation instead of you. They will negotiate with your creditor and reduce the amount you owe.
They will also come up with a plan so that you can collect enough money to pay. Just stay calm and things will fall into places. If worry too much about your problems that will not solve them faster. You need to take certain steps to keep you head above the water and everything will be fine. Luckily for you, there are already programs that have prepared those steps for you and have made them as easy to follow as humanly possible.
What is a loan shark and how to stay out of trouble?
A loan shark is a person who offers loans at extremely high interest rates. The payday loan can also be provided by an entity or a company. The term is usually used for illegal activity as in most cases there is legal regulation as to how high the interest rates can be. However, when there are not such regulations it can refer to predatory lending. A payday loan is a textbook example of this phenomenon. In most cases a loan shark would use blackmail, threats or even violence to collect back their debt. They are part of a very high-risk business and if they do not use those techniques, they might never get their money back.
However, that is very dangerous for you as the person who borrows the money. Blackmail and threats are also illegal and they can violate your personal space and freedom. In addition, they raise reasonable fear and require a very careful response. You need to protect yourself against such attacks. The best way to do that is by taking appropriate legal measure.
In the United States, there is such a thing as a non-standard lender. Non- standard lenders have occurred to “help” borrowers who would not classify for a loan from mainstream sources. They have received a license to give loans to those people. They have a smaller business and in most cases operate in cash. That is a significant difference from mainstream lenders that would normally not serve clients that do not have a bank account and will generally provide their services predominantly or exclusively online. A payday loan is one of the most popular methods used in connection with this type of finance.
The important thing to know is this service is legal and has reduced the amount of similar illegal practices by a loan shark. However, some of the borrowers in those cases have been accused of using oppressive or exploitative methods. Therefore, you need to be very careful. One example of a popular payday scheme would be when the borrowers try to charge an inflated “service charges”. They claim that is for cashing a paycheck. That is not correct because the only thing they allowed to charge is interest of your short- term loan. However, that interest with payday loan can reach outrageous amounts.
In addition, have in mind, there are regulations in regard of the chargeable fees and you are provided certain rights by the State. The law protects you and you just need to know how to use it correctly. Do not make any rash decisions. Stay informed and be aware of the actual situation. In the long term, the more you know about how all methods in the area work, the better your financial situation will be.
How to find a way out of payday loan debt?
There are a couple of ways out of payday loan debt. At first, you can try to achieve a payday loan consolidation through taking another loan to cover the first one partly and therefore reduce the penalties that keep coming. That might work for a while but later on, you will need an actual general solution to the problem. That is when you should look for the services of a payday loan debt settlement company. If you are not sure what they do, you can find detailed information here.
What is a payday loan debt settlement?
A payday loan debt settlement is a service provided by certain companies. In its essence, it is a program divided into several easy to deal with steps. The goal of the program is to eventually get you out of your payday loan debt. A payday loan debt settlement is also how the agreement that your payday loan debt settlement company reaches with your creditors in regard to the amount of money you owe them.
How does a payday loan debt settlement work?
You decide that you need professional help to deal with your payday loan.
Payday loan debt is very specific in a way that you think everything is good until it is really bad. It is a short term loan, the amount is usually not that big and you feel you can easily deal with it when the time comes. However, something comes up and you don’t manage to pay on time. That is the moment your debt starts to grow, creditors start calling you daily, you receive e-mails from then.
After that your creditors impose a garnishment on your wage, consequently, your disposable income is less, you might start having problems with other payments you should make. And on top of that, you receive a court summon. It is time for you to realize you cannot cope with that situation on your own anymore. You need professional help. Take the decision and make a step in the right direction – connect a payday loan settlement company.
You find the right payday loan debt settlement company for you
There are many payday loan debt settlement companies. It is one of the good things about the market economy in the United Stated – you have a choice. You have a variety of option. However, the problem with having a choice is that you should be cautious what you chose. Unfortunately, there are same scam payday loan debt settlement companies as well. Make sure you make a background check before you start doing business with anyone. Research them on the Internet and through any other method available to you.
You discuss your current financial situation with your new partners
Despite the difficulties of actually finding a good payday loan debt settlement company, once you have one, the hard part it almost over. From now on you will always have a trustworthy professional on your side to help you deal with the financial problems you have. You contact whichever payday loan debt settlement company you have chosen and arrange a meeting with them. At first, you will generally discuss the hardships of your payday loan debt situation and after that, they will offer you a repayment plan, you have to stick to. It will include monthly payments which to be used for your debt, the payday loan debt settlement company fee and any additional fees that may occur. For example, the bank fee for your special saving account.
You open a special saving account
This step is necessary and not optional. You need a separate bank account in order to collect enough money to pay whatever the new amount of your debt will be. According to how much you agree to save, your payday loan debt settlement company will perform the negotiations with your creditors. The quicker you manage to collect that lump sum, the shorter the payday loan debt settlement procedure will be. That is in your favor. If the procedure is not very long, you will have less interest to pay and fewer penalties. The standard length of a payday loan debt settlement procedure, however, is between three and eighteen months.
Your payday loan debt settlement company starts negotiating with your payday loan creditor
In this step actually, you do not have to do anything. Your payday loan debt settlement company will do it for you. You pay them in order to have less trouble for yourself. Let them prepare for the negotiations. It is important to remember that you pay the payday loan debt settlement company only after they have finished their job successfully and not beforehand. If they do not manage to bring what they have promised, if they do not reduce or do not settle your payday loan debt with you payday loan borrower, you do not have to pay them. Make sure you do not say any document that says otherwise. In some cases, it is even illegal for the payday loan debt settlement company to request their fee to be paid in advance.
Your payday loan debt settlement company reaches an agreement with your payday loan creditor and make a payday loan debt settlement
This is yet another easy to follow step. In this case, again nothing is required from you. You just need to read carefully the paperwork and maybe sing in few places.
You pay your payday loan debt settlement company for the service they have provided you with
In most cases, the payment of the fee of the payday loan debt settlement company will come out of the special saving account you have for the whole procedure of the payday loan debt settlement. In any case, the amount of the fee will be known beforehand – from the moment you negotiate it with your payday loan debt settlement company at your very first meeting. You will have more than enough time to prepare for that payment. Plan it in advance and there will be no financial troubles.
Your bank account operator pays your payday loan creditor the lump sum agreed upon in the payday loan debt settlement
The special saving account you open for the payday loan debt settlement procedure will be operated by the third independent party. That means it will not be operated by you or your payday loan debt settlement company. It is your bank account operators to make the payments to the payday loan debt creditors once the negotiations have finished. You should be aware of those facts and know it is how the procedure works. If everything goes as planned, you do not need to take any actions in that step as well.
The program ends and as a result you are out of payday loan debt.
That is actually the best step. All you need to do is enjoy the freedom and the relief of having your debt settled. That was the goal altogether.
You can see for yourself those are very small and very easy to follow steps. You should have no problems with the procedure, it is meant to help you. It is created in such a manner so that it is useful and effective.
What is a payday loan debt settlement company?
A payday loan debt settlement company is a body built up of people who professionally deal with debt. Their job is to settle your debt with your creditor and make it go away. They do that on day to day to their basis. A payday loan debt settlement company provides expert services for a certain fee. It is a small price for what you get in return and in any case it is much cheaper than any other option you have.
How to avoid making a mistake with you payday loan debt settlement?
Payday loan itself hides many risks. Although payday loan debt settlement is a way out of some of them, it comes with a certain amount of danger as well. We provide you with three simple steps that if followed correctly should manage to keep you out of trouble. Be cautious and stay on the safe side. Here is what you can do about it:
Choose your payday loan debt settlement company very carefully.
It might seem like a small step that you do not really have to put that much effort into, but it is actually the most important one. You want your financial troubles resolved as soon as possible. However, do not rush into choosing the first payday loan debt settlement company that crosses your sight and makes big promises! Listen to what they are really proposing, evaluate whether it sounds reasonable and realistic.
The last thing you need is for them to outplay you instead of helping you. It is best if you can check whether there are any complaints against them and if their previous clients are satisfied with the service they have received. Research as much as possible and make an informed and educated choice! The success of the how payday loan debt settlement procedure is in choosing the right company. The right company is the one you can trust and which understands your needs.
Make sure your rights are not violated
There are several ways your rights can be violated by the payday loan debt settlement company in the payday loan debt settlement process. First, you have a right to be informed. Your payday loan debt settlement company should explain everything in a way you can understand. They should also provide you details about any complications and extra fees that may occur. Second, you have a right to pay after you have received an actual service. Do not fool yourself into paying anything you do not actually owe. Thirdly, you have a certain right to privacy. There are regulations when and how much your creditors can bother you. It is up to you to make sure your rights are protected.
Know what the relevant laws are and learn how they should be applied in your case
This will provide you with a certain strength. You maybe wonder how come and why is that important? It is very simple, information is power. When used in the right way, laws can be very useful. Sometimes even a simple treat to sue said at the right moment can have an enormous effect.
In most cases, it is mutually beneficial for both sides the dispute to be settled outside the court because sometimes it is hard to say you will win at the end and there are a lot of legal fees that can be avoided. Therefore, do not underestimate the legal protection the state has provided you with. Instead, learn how it works and uses it in your own favor.