Quick Cash Payday Loans Simplified: Responsible Borrowing Tips
By Carolyn Heidmann
In recent years, the popularity of quick cash payday loans has been on the rise. This surge in popularity is partially due to wider access. Over the past decade, many states have finally decided to legalize this form of consumer lending products.
Cheap payday loans generally appeal to a wide variety of consumers, since it is a short-term remedy to a financial hardship. However, payday loans can also become problematic for many consumers.
How Cash Advance / Payday loans Work
It might be difficult to understand why a cheap payday loan might pose a risk for a borrower. Ideally, the loan is paid back in a prompt manner, which means there will be no additional fees or late charges. However many people do not pay their loan back on time, leading to a significant fiscal problem. Payday loans actually go by several names, including: fast easy payday loans, cash advance loans, check cash advances, cheap payday loans, and quick cash payday loans.
The fees associated with a quick cash payday loan are stated in advance to the consumer. Federal and state regulations require lenders to explicitly cite their fees and all possible charges in their contracts with the borrower. The fees associated with fast easy payday loans make good sense to most consumers, since the cost of those loans is typically smaller than the late fees that the consumer is trying to avoid. For example, if you borrow $100 in the form of a quick cash payday loan, you can expect the corresponding fee to be about $18. The fee for a cheap payday loan isn't really that much, if you regard the fee as a service charge for a convenient short-term solution to your financial burdens.
If you are borrowing the money to avoid late fees, bounced checks or utility reconnect fees, then the fast easy payday loan product can be a real blessing to the borrower.
Assuming the borrower repays their loan on time, the lender will only charge one small fee for the duration of the loan; the typical duration is roughly one to two weeks (the consumer repays the debt on the day that they receive their next paycheck). However, if a borrower does not pay their loan back on time, the borrower will face additional fees.
Are Fast Easy Payday loans A Blessing Or A Curse?
When a consumer takes a quick cash payday loan for the purpose of covering a short-term financial shortfall, the loan works out to be a blessing for the consumer. However, if a consumer chooses a fast easy payday loan to help manage a long-term financial problem, the payday loan can actually make a difficult financial situation much worse than it would have been without the payday loan.
Payday loan stores and companies offer their loans based on a very short window of payback. As stated previously, most fast easy payday loans are written for a term not to exceed two weeks. The finance company does expect to be paid in full when the borrower receives their next paycheck, hence the term "payday loan."
A payday loan company or store expects to be paid in full upon the borrower's next payday. If a borrower requests an extension to the following payday, the borrower will be required to sign a new contract, which will in effect double the borrower's finance charges or loan fees. Granted, if you need to push the loan out just one more paycheck, the extra fees that will be incurred may not be that big of a burden. However, if you take this same principle out five to six paychecks, then the consumer's loan fees could easily bypass the amount of the original loan.
By following this example, one can easily see how a simple low-cost loan could spiral out of control, putting the consumer in a position that would be difficult to bring back under control.
The Dangers Of Using Quick Cash Payday loans To Address Long-Term Financial Problems
If a borrower were in a deep financial crisis when they begin a fast easy payday loan, it would not be very hard for them to get into a financial nightmare that will be extremely difficult to escape. If the borrower was in a financial hardship before they began the payday loan cycle, it is feasible that he or she will not be able to repay their loan promptly. Perhaps the consumer's financial ruin began with a miscalculation in the monthly budget or when an additional emergency situation followed their first financial crisis, and now the borrower is forced to extend their debt beyond their original agreement with the lender.
It is important to realize that the fast easy payday loan must be regarded in the same way as any other debt. Since payday loans utilize a loan fee as their service charge, delaying the repayment of your cheap payday loan can be expensive and financially catastrophic.
Your quick cash payday loan fees could literally double every two weeks, until the loan is paid in full. Thus, what used to be a small service fee for a financial emergency solution can double, triple, and quadruple
in just a few pay periods. It all depends on how long it takes the borrower to repay their debt.
It is strongly recommended that you do not use fast easy payday loans to:
* Pay for unnecessary purchases,
* Pay for ordinary financial responsibilities,
* Pay on credit card debt,
* Pay off other payday loans, or
* Try to solve long-term financial problems.
Some borrower's find that they need to make one big payment that cannot be covered with a single quick cash payday loan. So, they take out multiple payday loans in the same month. This also is a recipe for disaster.
Fast easy payday loans are meant to be a short-term solution to an emergency situation. They are not meant to resolve bigger problems. Quick cash payday loans should not be used casually.
These short-term loans are very cheap if you utilize them to carry you to your next paycheck. They can still be very cheap if you need them to carry you through two paychecks. But, once you get beyond your second paycheck, cheap payday loans stop being an inexpensive financial product. The longer a consumer allows a payday loan to roll over, the more expensive the loan will become.
How-To Prevent a Quick Cash Payday Loan From Becoming A Burden
There are many common sense tips that can help you to avoid the worse case scenario shown above, in regards to a quick cash payday loan that you might take.
First, it is important to approach fast easy payday loans in a responsible manner. Try not to borrow more than you can currently afford to pay back. Borrow only what you need to manage your immediate monetary problem. Also, work hard to stick to the date you agreed upon in the loan contract, which you signed. By following this plan, you can avoid any rollover fees on your loans.
How-To Prevent Yourself from Needing To Use a Fast Easy Payday Loan
The most common reason consumers find themselves in a financial quandary is because they consistently overspend, with little regard for establishing and maintaining a budget. The best way to avoid the difficulties of late payment fees is to create a monthly budget. If you meticulously prepare and adhere to a budget every month, you will avoid overspending and you will find that you will have all the money you need, when you need it.
If you feel that you need assistance with planning a budget or if you need help managing your finances, there is consumer credit counseling services in every state. Someone there can help you develop a debt repayment plan and monthly budget to help you to keep your financial situation stress free. To find a consumer credit counseling service agency near you, go to the National Foundation For Credit Counseling (NFCC org) website.
Quick cash payday loans can be a beneficial solution for those who adhere to the conditions they agreed upon with their lender. For the person who only needs a few hundred dollars that they know they can pay back immediately upon their next paycheck, the fast easy payday loan is a godsend.