Year: 2020

Understanding APR

Whether you’re taking out a 30-year mortgage or whether you’re taking out a 14-day payday loan at lender near you is usually required to tell you what the Annual Percentage Rate (also known as “APR) is for the loan. The APR is one way to compare the cost of a loan, so if you are considering loans from multiple sources you can compare the different products. APR is far from perfect, but it is a useful tool when you’re considering a payday loan, car loan or a mortgage.

Why do we use APR?

Borrowing money can be confusing. Banks and payday lenders and other lenders will throw out a lot of numbers that may mean different things. The Truth in Lending Act was a federal act that, among other things, required lenders to quote the APR to someone who is considering taking out a loan. They did this, ostensibly, to reduce some of the confusion in the marketplace.

What is APR?

APR lets you look at the costs involved in a loan in terms of percentages. A $100 loan with a 10 percent APR will charge you $10 per year. Obviously, since that scenario doesn’t involve paying off any principle, it’s not exactly the best example, but you get the idea.

The limitation of APR

Unfortunately, there are limitations. Your APR may include more than just the interest on the loan. It might include things like processing fees or even mortgage insurance on a home loan. You need to look at the APR in detail so you know what is and what is not figured in for any given loan. You need to know what charges and expenses are involved in a loan. Beyond that, you need to get the big picture and look at how long you’ll have the loan to decide whether or not it’s worth it.

Calculating APR

If you need help figuring out the APR on a potential loan, ask the lender. They are required by federal law to provide you with the APR on a loan. If you want to calculate it on your own, there are a number of online services that can help you do exactly that, as well.…

Big Payday Loans Mean Big Trouble

If you’ve ever taken out a payday loan, you are probably quite familiar with the drill. You go in, let the lender know how much money you need to borrow. You write them a check, which they will cash in two weeks. If you don’t have enough in your checking account to cover the check when the two weeks is up, you wander back into the payday lender and take out another loan. In some cases, the next loan you take is even bigger, because not only do you have to cover the original loan amount, you have to pay the fees on the original loan.

Keep this pattern up and you’ll find yourself in big trouble. Those fees may not seem like much, but they add up and they add up fast.

Let’s say, for example, that you find a payday lender with relatively low rates. They might charge you $8 per $100 borrowed. Maybe you needed $225 to get your car fixed. The payday lender only gives loans in $100 amounts, so you borrow $300 and write a check for $324. You plan on taking the extra loan amount and setting it aside.

Well, of course, it doesn’t always work that way. It might be that you had another emergency crop up, or that you just decided to take that extra money and buy your girlfriend a nice dinner at that sushi place downtown.

Hope it was worth it, because now you’re hosed. Come payday, you may not have enough to cover the payday loan. Sure, you’ve got $80 that you can put toward it, but remember that the lender doesn’t loan amounts less than $100. So, you borrow $300 again, at another cost of $324.

One thing leads to another, and two weeks later you’re no better off. In fact, you decided to take in a concert, and wound up blowing $150 unplanned between your tickets and a couple of T-shirts.

Come payday, you don’t even have the $324. So, you take out a $400 loan, at a cost of $432 this time. Now you’ve paid a total of $80 in fees, in just a month and a half, and you’re no further ahead.

Avoiding this kind of payday loan mess isn’t always easy. Sometimes, it means borrowing less than you need. If your car repairs are $225, borrow $200 from the payday lender and get the other $25 from a friend or family member. Buckle down in between, so that you really can pay off your payday loan.…

Should You Stop Payment on a Payday Loan Check?

Payday loans can be a difficult thing. The fact of the matter is that, while the actual fees charged for a payday loan aren’t all that high, the interest rate is extremely high when compared with other forms of borrowing. Add to that the fact that many people find themselves stuck in a vicious payday loan cycle where they have to take out the loans again and again and again, and it can be extremely frustrating.

Some people think that stopping payment on their payday loan check is a way to end the cycle. The payday loan company won’t be able to cash the check, and they’ll have to try to collect their money another way. While it will hurt your credit report, you justify stopping payment by telling yourself you’re going to save money in fees.

Here are some things you need to know about stopping payment on a check, before you decide to go this route:

Stopping payment doesn’t cancel your contract to repay the loan. This is an important point. You will still owe the money, and the payday lender can come at you with civil action if you do not.
You should notify your bank that you want to stop payment prior to the date on the check. Make sure you notify the bank both verbally and in writing.
There will probably be a fee to stop payment. The fee is usually about the same as a bounced check fee. You’ll need to provide your bank with the check number, date it was written, who it was written to, and the amount of the check.
The order to stop payment may only last six months. This can vary from one state to the next and from one bank to the next. You may be able to ask your bank to restore the funds and return the check if a check older than six months comes through, however.
Check state laws. Some states may put you at legal risk if you stop payment on a payday loan check. Alabama and Alaska let the payday lender pursue criminal action if you don’t make good on the check and close your bank account. In Utah, the lender can sue you for damages if it cannot make good on the check.
Make sure you thoroughly consider your situation before you decide to stop payment on a payday loan (or any other) check.…

Wisconsin Passes Payday Loan Reform

If you listen to the opponents of payday loans, you’d think that these companies were conceived in Hell and that their employees are the spawn of Satan himself. These voices are often loud, and it’s a pretty regular thing that they get heard by folks in state and federal government. Arizona’s Attorney General, for example, has gone after payday lenders on many occasions. There are other states, such as Illinois, that have passed a number of different measures aimed at shutting down payday lenders.

Wisconsin has recently passed legislation that is designed to combat the high interest loans provided by payday lenders. Proponents of the legislation argue that the high interest rates take advantage of the working poor, and that the rates are predatory.

Opponents of the legislation make their case based on free enterprise. They argue that there is a demand for short-term, low value loans in the marketplace, and that the only way for a company to make a short-term low value loan profitable is to charge what winds up being a high interest rate. They argue that the fees associated with a payday loan are relatively small when compared with fees for things like overdraft protection from a bank or a bounced check fee.

Unfortunately, there is speculation that this legislation won’t really solve the problem, and that the working poor will still be vulnerable to high-interest loans.

The problem with the legislation is that it doesn’t actually include any rate caps. Instead of limiting the fees that the lender can charge, it limits the amount that the borrower can borrow. The legislation caps the size of a payday loan at $1,500 or the equivalent of 35 percent of the family’s monthly income, whichever is lower. It would also allow borrowers to roll over their loan once.

The legislation also tries to reduce the number of payday loan businesses, as well as limit their locations. A payday lender would not be able to operate within 150 feet of a residential area, or within 1500 feet of another payday lender.

Up to this point, Wisconsin has been the only state to not put some regulation or another on their payday lenders. This particular legislation opens that door, although it does it in such a way that it may not have much of a beneficial impact on the folks who are taking out these loans to begin with.…

Payday Loans

You have run into a snag and you need a quick bit of cash. Where do you turn for the money you need to get by? Let’s take a look at some options and how they stack up against the payday loan option.

Credit cards
You might hear people talk about how they need a credit card for emergencies. These might work for some people. What usually ends up happening is people will carry a balance on these little plastic cards.

This balance ends up costing more than you think. Months of interest only compound and grow. Soon you will have paid more in interest payment than you will have paid for the original item. Credit cards can actually cost you more than a well-used payday loan.

Personal loans
Personal loans are great if you have a good bank. Not everyone can acquire a personal loan though. People with bad credit have an especially hard time getting loans. Banks also take some time to handle all the paperwork. The convenience of walking in and walking out in a matter of a few minutes is lost to the banking process.

Just like credit cards, a personal loan will come with interest to figure out as well. A payday loan taken care of right away might run you $35 to get. What will the interest over the personal loan duration run you?

Sometimes you just need a quick $100 though. A bank will not even consider this. This is where a payday loan can come in and help. Just make sure that you only take the $100 that you need. You also need to make sure you pay this back as soon as possible.

Selling items
Selling items on your terms is a great way to make up money. Selling items in a bind will lead to people taking advantage of your situation. Taking your grandfather’s wedding ring to a pawnshop might sound like a great idea at first. Think it through though. The pawnshop is out to make money for them. They are going to give you the lowest offer they can. This way they can sell it at five times the amount and make a killer profit.

Let’s say you decide to have a yard sale. This might be a viable option in the spring. Yet, what happens in the winter months? Even worse, what happens when you need the money today? You cannot get word out fast enough to hold a successful yard sale at a moment’s notice.

A payday loan in this situation would get you the money you need today. You might still have to organize that yard/garage sale to pay the payday loan. The advantage here is that you have a day or two to get your yard/garage sale organized and advertised.

No matter how you shake a stick at it, you need to make sure you pay off that payday loan within the original allotted time. Going past this time will only make your payday loan interest rate go sky high. Payday loans can be helpful if utilized correctly.…

Get Money Cheap

Everyone is looking for a deal. You want to get a deal on cheap groceries. You want to pay less for cheap gas. You don’t want to pay too much for anything, not because you’re cheap in general, but because you don’t want to waste money that you may or may not even have in the first place.

You even hope to find something cheap when it comes time to borrow money. Yet, you still find yourself inside the payday loan store getting ready to pay as much as 400 percent or more in interest on a couple hundred dollar loan.

Fortunately, there are alternatives. There are ways to get money cheap without having to resort to the payday loan trap. Here are some ways to try to get the cash that you need before you walk through the payday lender’s doors:

Ask for money from friends or family. It can be humiliating, to be sure. But is it 400 percent interest humiliating? Probably not. Consider drawing up a written loan agreement to help avoid problems down the road.
Ask for money from your bank or credit union. Many banks, and many more credit unions, may be willing to make smaller dollar loans. If you don’t ask, you’ll never know.
Consider a credit card. Credit card interest rates are lower than payday loan rates, and you have longer to pay them off. If you can avoid taking an actual cash advance from your credit card, do so, because the fees and rates that come with a cash advance are much higher than those for purchases. Just about everyone takes credit cards now.
Look into overdraft protection. Now, this can get quite expensive, too. Check with your bank to see if you can get overdraft protection, and then make sure you only overdraft once – so that you’re not paying the overdraft fee over and over again.
Wait for it. Sometimes, you just need to hold off on a purchase. No, that doesn’t get you money cheap, but it does save you that huge amount of interest you’d pay if you can just maintain a little patience.…

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