Everyone deserves to helped out every so often.  Even the most hardworking person on earth would find himself facing difficult situations every now and then.  That is why I think it is a good thing that there are sources of help (financially speaking) such as payday loans.

Imagine if you were suddenly faced with a very important need that you had to expend some money on.  Then imagine that you didn’t have any other source of cash.  Of course, maybe you can borrow money from your parents.  Then again, what if they don’t have the money to lend you or what if you were not in good terms?  You may have lots of friends but how many friends do you know who would willingly lend you money?  And even if they did, how sure are you that borrowing money from friends will not put a strain on your relationship?  It is true, when it comes to money matters, things do tend to get complicated.

With payday loans, however, things are very simple!  A payday loan is a means of borrowing money from a lender for a short period of time.  It is also known as cash advance loans in some areas.  Being a short term loan, a payday loan needs to be paid back within 2 weeks to a month.  This repayment period varies from one lender to another but it does play around a certain time frame.  The good thing about payday loans, however, is the fact that they can provide the financial assistance that you may need when you need it.

Perhaps the biggest problem when it comes to other types of loans is that it could be quite difficult to avail of one.  Conventional lenders, in particular, have placed stringent requirements for individuals who wish to borrow money from them.  This is but understandable as they will be risking their money when they lend it.  Payday loan lenders, however, make it easier for people to borrow money from them.  How come they can do it?  First, the amount that they lend could be significantly lower than personal loans.  One can expect to be able to borrow anywhere from £100 to £1,500 – maybe more or maybe less.  This is also the reason that the loan is only short term – lower amounts mean that borrowers can pay them off faster.  Second, payday loan providers use the borrower’s next pay cheque as a sort of security.  They make sure that the borrower has a regular job and is expecting a pay cheque in the near future.  This, in theory, enables the borrower to pay off the loan.

Indeed, if you look at it closely, when you cannot turn to anyone else for financial help in times of crisis, payday loans can be the solution to your needs.  They do not come for free, though, you have to remember that.  Payday loans are charged with a fixed fee and you have to pay this off together with the loan principal.  That is why you should be a wise borrower – borrow only what you need and what you know you can afford to pay off at the designated date.

If I were to believe the host of articles and press releases that I read online and in the newspapers about payday loans, I would think that only the poor and uneducated make use of payday loans.  I guess it is a good thing that I do not easily believe what I read or what I am told.  I am the sort of person who likes to test the waters for himself before believing.  Anyhow, if you are anything like me and you are somewhat interested in payday loans, then you would not be believing all these things and taking them at face value.  So, the question remains.  Who are the users of payday loans?

I would say that it is hard to generalise – that is normally akin to digging a grave for yourself.  However, if you were to take a look at the people who make use of payday loans, you would see that they come from all walks of life!  I assume, though, that the rich would not be clients of payday loan providers as they would not normally find themselves in a position wherein they would desperately need a thousand pounds or so and not have any alternative.  In any case, the average person would be the one needing such an amount.  People from the middle class are some of the most common users of payday loans.

Why is this the case?  For one, a payday loan requires that the person who is borrowing the money should have a stable job.  An alternative to a job would be having one’s own business.  The idea is that the person has a stable source of income.  Normally, people from the middle class fit the bill in this regard.

Another thing is that individuals from the middle class – like myself – may not always have extra cash on hand to deal with financial emergencies.  Of course, we may have our jobs and other sources of income.  However, more often than not, the money that we earn from these activities may not be enough to have a tidy sum stashed away.  That is why, when faced with a financial emergency, we have to look to other sources for cash.

Payday loans are very convenient.  They can be acquired without having to go through a long process of interviews, applications, documentation, and the like.  For working people, this is very important.  Not everyone has the time to leave work and spend hours at the bank trying to borrow money, least of all employees who are paid by the hour.   For people like these, being able to apply for a loan and getting the cash without having to call off work is a very important consideration.

The next time that you hear about payday loan providers preying on the needy and uneducated, think again.  Payday loans serve a purpose and even those who are educated can make use of them.

Sometime last week, the Wall Street Journal published an article on payday loans in the United States.  Though we may be in a different country from them, the interest surrounding payday loans remains the same.  So let’s take a look at what’s going on over there and we may even find something that we can use.  Anyway, the WSJ published “SOCIAL INSECURITY: High-Interest Lenders Tap Elderly, Disabled.”  Here is an excerpt of that article:

One recent morning, dozens of elderly and disabled people, some propped on walkers and canes, gathered at Small Loans Inc. Many had borrowed money from Small Loans and turned over their Social Security benefits to pay back the high-interest lender. Now they were waiting for their “allowance” — their monthly check, minus Small Loans’ cut.

The crowd represents the newest twist for a fast-growing industry — lenders that make high-interest loans, often called “payday” loans, that are secured by upcoming paychecks. Such lenders are increasingly targeting recipients of Social Security and other government benefits, including disability and veteran’s benefits. “These people always get paid, rain or shine,” says William Harrod, a former manager of payday loan stores in suburban Virginia and Washington, D.C. Government beneficiaries “will always have money, every 30 days.”

The law bars the government from sending a recipient’s benefits directly to lenders. But many of these lenders are forging relationships with banks and arranging for prospective borrowers to have their benefits checks deposited directly into bank accounts. The banks immediately transfer government funds to the lenders. The lender then subtracts debt repayments, plus fees and interest, before giving the recipients a dime.

As a result, these lenders, which pitch loans with effective annual interest as high as 400% or more, can gain almost total control over Social Security recipients’ finances.

After reading this article, one would think that payday loan lenders are the bane of the society!  However, I ran across another article which points out inaccuracies in the former article.  It states:

The Community Financial Services Association (CFSA), the national payday loan trade association, is looking to correct inaccuracies in the February 12th front-page Wall Street Journal story by Ellen E. Schultz and Theo Francis, Social Insecurity: High-Interest Lenders Tap Elderly & Disabled. CFSA claims the authors confused payday lenders with other types of small loan services: primarily installment and catalog lenders.

CFSA claims the article describes loan practices that are NOT conducted by payday lenders.  Errors in the WSJ article as cited by CFSA

Example 1:
The article says payday lenders are “…forging relationships with banks and arranging for prospective borrowers to have their benefits checks deposited directly into bank accounts.” This is patently false. State laws only authorize payday lenders to hold a personal check, deposited on the borrower’s payday.

Example 2:
The story says: “One-fifth of those without conventional bank accounts are receiving government benefit checks through nonbanks, including payday lenders.” This, too, is blatantly false. Payday lenders do not receive checks on behalf of recipients (state law prohibits this practice) and 100 percent of payday lending customers have a checking account at a bank or credit union.

Example 3:
The two key anecdotes detailed in the article involve companies that are not payday lenders: Miracle Loans and Money Tree of Georgia

Example 4:
The article says that the payday lending industry is “clustered” around government-subsidized housing in Washington, D.C. “There are at least four payday lenders within a mile-and-a-half of Fort Lincoln,” the piece says. Washington, D.C., is an urban environment. A mile-and-a-half away from a location in an urban environment does not constitute “clustering” by any known standard.

So which one to believe?  I think that your personal experience should dictate your stand.  Personally, I still think that payday loans are useful and should be used properly.

How many sleepless nights have you had agonising over that important financial snag?  I know that I have had countless sleepless nights trying to figure out how to deal with some financial glitches in my life.  Now that I think back, I realise that I could have had better nights if I had only known of payday loans and what they can do for me.  Trust me, I am not exaggerating here.  I am sure that if you have ever been in the same situations that I have found myself in, you would know what I am talking about.

So what’s all the fuss about payday loans anyhow?  First off, let us describe what a payday loan is, exactly.  It is a short term loan that is meant to help out people (perhaps like you and me) who have urgent financial needs – and when I say urgent, I mean really urgent.  Being a short term loan, a borrower of a payday loan needs to pay back the loan amount within a relatively short period of time.  This period varies from one payday loan provider to another but in general, the borrower would be expected to pay the amount back within 2 weeks to a month.  This period can be extended, of course, but that would entail additional charges and fees.

Another feature of a payday loan – which is the most helpful, I think – is the fact that you can avail of the funds quickly.  What time frame am I talking about here?  For example, it is Monday afternoon and you find out that you need money by Tuesday afternoon.  If you decide to take out a payday loan to take care of this need, you could have the money in your hands on or before the afternoon of the next day. Yes, it is that fast!  Of course, this time frame may vary depending on various factors – the lender, your requirements, and other specific circumstances.  The general situation, however, is that you could receive the money that fast.

Now just imagine you in this situation.  The chances are that if you did not know about payday loans, you would be spending all night thinking about the different options available to you.  You would probably be drawing blanks and keep yourself up all night!  With this knowledge about payday loans, however, you do not need to do that!  Instead, what you can do, once you find out about your urgent monetary need, is to go online and find a reliable payday loan provider, fill out their application form, and wait for the approval.  Once you get the approval – this can be done within the day – then you merely have to wait till the next day to get the money in your bank account.  For some payday loan providers, they even offer quicker release of cash.  For these lenders, you might be able to receive your cash with in the same day of application.  So do yourself a favor – check out payday loans and get a good night’s sleep.

You have to admit it – payday loans have gotten more than their fair share of negative publicity.  This is actually one of the main reasons that some people are turned off by the very mention of payday loans.  I have said it time and again, and I will say it again – there are always two sides to a story and the payday loan saga is no different.

On one end of the spectrum, we have those people saying that payday loans are perfect, that they have no flaws at all.  On the other end of the same spectrum, we have those people who are saying that there is nothing good to be gained from taking out payday loans.  So what is one to believe?  Do not despair because there are those who prefer to take a moderate stance and stay somewhere in between the two extremes of the spectrum – and I would like to believe that I am one of those.

So what is the bottom line?  Payday loans have their good and bad sides.  That’s all there is to it.  In this post, though, I would like to take a look at some of the concerns that people may have about payday loans and how to address them.

Debt issues
One of the biggest concerns that people have when it comes to payday loans is the idea that they will only end up in more debt than when they first started off.  The truth of the matter is that this can happen – and indeed, it has happened many times.  Yet another truth is that it does NOT have to happen!  A payday loan is just like any other loan in that it has to be paid off on time.  If payments are missed or made late, then of course, corresponding fees and charges will be applied. One danger with payday loans is that people become lulled into a false sense of security.  This is probably due to the fact that payday loans are so easy to acquire.  As such, they over use or misuse payday loans.  This is when debt problems arise.  The solution is simple, really – simply borrow what you can afford to pay back ONLY when you need it.

Disreputable lenders
Unfortunately, there are a number of payday loan providers out there who may not be legitimate or overcharge.  We cannot avoid this fact.  In every other kind of businesses, there are always people who want to take advantage of others.  The sad thing is that the whole industry bears the brunt of the bad reputation.  The only solution to this is to do your research before committing to any payday loan provider.  Make sure that the payday loan provider you are dealing with is a legitimate one and that the charges they ask are reasonable.  You can do this by comparing one payday loan lender to another.

As you can see, the concerns relating to payday loans are not that insurmountable.  They have solutions and these solutions lie in your own hands.