One of the phenomenons of modern times, the payday loans cycle is one of the most difficult financial problems to escape from. There are ways of getting out of the payday loans cycle of not being able to pay back a loan and having to extend it or take out an entirely new loan to pay off a previous debt. The main issue customers and consumer groups cite for the problem of payday loans is the high interest rate charged on them, with high interest rates the chance of paying off a payday loan is almost nil for many average American people.
When taking out a payday loan a reputable company should be used, with some protections awarded by lenders who are members of a financial industry consumer group. Where possible the best option is to take out a loan with a lender who offers some form of protection for consumers who cannot make the regular payments they signed up for. An extended payment protection plan can often be worked out with a payday loan lender, which means that an extended payment plan will be worked out between the consumer and lender to repay the loan over a shorter period of time. Regular payments will usually need to be made for this kind of protection to escape the payday loan cycle to remain in place. When a lender is not part of a group offering such protection it is a good idea to discuss the situation with the lender, who may be able to assist in reducing payments to get the loan back on track.
Often the major problems facing a person trapped in the payday loan cycle is often bad budgeting. Across the US charitable groups will often offer individuals, couples and families free financial counseling, this will assist in forming a budget that gets the consumer back on solid financial ground and escape the high interest loans that are the only option to pay off small debts. Many counseling groups will also offer tips on any groups or charities that offer financial assistance to help an individual get back on track with their finances.
Apart from taking the steps mentioned earlier the main options for escaping the payday loans cycle is to tighten the reins on the amount of money spent in outgoings. When this is not possible because of the high interest rate paid on payday loans the other options are to take on extra work to raise more money or seek assistance from friends or family. A friend or family member may offer tips on employment opportunities or be able to offer a loan with no interest or a low interest rate.
Regulations for payday and other forms of short term loans can be complicated. Different states have different rules regulation both payday and short term loans. However there are a few constants that appear throughout the United States regulating these types of loans. In this article we will learn what payday and short term loans are and what restrictions on these loans are typical throughout the United States.
What is a payday loan?
A payday loan is a typically small, unsecured loan given to someone based on current or former employment history and pay stubs. The difference between a secured loan and an unsecured loan is that a secured loan has some collateral behind it that the lender may repossess in the even of nonpayment. An unsecured loan is given simply based on factors like credit history, net worth, or employment and employment history. Payday loans are typically extended to be people to be repaid within 30, 60, or 90 days after which time interest begins accumulating.
What is a short term loan?
A short term loan is a loan that is extended for a small period of time, usually no more than a few months. A payday loan is a form of short term loan but not all short term loans are payday loans.
Due to the differences between payday and short term loans they do have a number of different regulations. Many payday loan operations are regulated by much more stringent usury (borrowing) laws. These laws prevent the payday loan company from charging excessive interest as well as regulating how and when they can collect money. For example, a payday loan company may not be able to contact a borrower between certain hours or by certain forms of communication such as over the phone.
Unsecured loans are also regulated by city and state governments in order to prevent certain individual borrowers from becoming the victim of confusing or unclear contracts. Many dealings of payday loan companies are scrutinized much more than other forms of short term credit such as pawn shops. Many different payday loan companies are not allowed to operate within certain areas of cities or around military bases due to some perception that these companies can possibly charge too much interest.
To answer the question, yes regulations for short term loans are much different than payday loans. Short term loans encompass a wide variety of forms of credit and lenders, from banks to pawn shops. Payday loans are filled by a specific niche of payday loan companies and they are also based on a specific form of credit which is employment credit. For these reasons the regulatory climate for payday loans is very much different than your typical short term loan.
From time to time, everyone finds themselves in a financial bind. There are many loan options available to help with the need of obtaining funds. However, many lenders require perfect credit scores before they will even consider lending money. One of the more flexible and fastest ways to obtain money is through a title loan. A title loan is a short term loan that is not based on credit. It is a loan that uses a car title as collateral. In today’s world, attempting to get a loan can be nothing short of difficult. People with less than perfect credit ratings are finding it more and more difficult to obtain many different types of loans simply because lenders are cracking down on who they loan money too. However, our economy is in a state that leaves most people in a situation where obtaining a loan for different purposes is the only way they can make ends meet.
A title loan is a good option if you need money fast.
Obtaining a title is a reasonable quick process. Most people have their money within an hour or two. Since title loan companies do not have to run credit reports, talk to other financial institutions, and do not require you to give them the details of every dollar made or sent over your lifespan, the process is quick and for the most part hassle free. You will, however, need proper documents when you go into a title loan company. Having everything ready ahead of time will ensure that the process goes smoothly and fast. The person who owns the vehicle that money is being borrowed on will need to be the one who applies for the loan. To prove this you will need your identification, preferably a drivers license, and of course the title of the vehicle. Since the amount of money you will receive is based on the equity of your vehicle you will need to have the vehicle with you so they can view it. Other documents you will need to bring with you are proof of residency, up to four weeks worth of pay stubs, or if you are self employed, tax records for the past two years will work. You will also need to bring in proof of insurance so the lender knows that if the vehicle is damaged while you owe them money, they will not suffer a loss. Other than that, you need to have a couple of references with addresses and phone numbers to verify your character and ability to pay back the loan. That’s it! You will have the money you need that same day, and still be able to drive away in your vehicle.
There are short term lenders out there who will use non-traditional credit histories when it comes to qualifying people for loans. Understanding how these short term lenders use these histories can help you when you are applying for a loan.
A non-traditional credit history is a way for loan applicants to prove their credit worthiness if they don’t have a traditional credit history. A traditional credit history basically includes a history of loans and the debtor’s history when it comes to paying back those loans. Not everyone has those types of loans in their past; however, which is how a non-traditional history can come into play.
A non-traditional credit history is basically a showing of a person’s credit history that uses other forms of bills besides loans. To compile a non-traditional credit history, a person needs to get together receipts from large bills they have paid in the past, such as rent checks to the landlord or utility bills. Showing pay stubs is also another important element of compiling a non-traditional credit history.
Basically, anything that shows a history of on-time payments can be used to illustrate a healthy non-traditional credit history that short term lenders will use. There are rent-to-own companies that people use when they are unable to purchase things out right. A history of payments with one of those companies can be used to show a good history.
People often get short term loans for quick emergency funds. Anytime you get a short term loan and pay it back, the paid balance can be used in the future should the need for another short term loan arise. For payday loans, all the lender needs to know if your current income. You secure the loan by providing the asset of your future paycheck as well as automatic access to your bank account. This allows the lender the lend to you on a short term basis. Such a loan is ideal because those types of lenders have no need or interest in one’s traditional credit history or lack thereof.
Not everyone has the FICO Score that they desire but many short term lenders are using non-traditional credit histories as a way to evaluate people and qualify them for loans. There are options out there for people who need short terms and who do not have the adequate credit history necessary to apply for a traditional loan. Many lenders nowadays specialize in using a short-term history.