Payday loans have come under alot of scrutiny lately. A Payday loan is a short term loan until an approaching payday. Payday loans can be handled responsibly so as not to get the consumer in alot of trouble. I hope to give you what you need in order to use these loans responsibly.
The first rule of thumb in getting a payday loan is not to do any from any online merchants. Consider, instead, using a brick and mortar office in your neighborhood. The payday loan business is highly regulated by each state and is audited on a regular basis to make sure that the company is upholding the laws. If a law is found to have been broken during the audit, the payday loan company is heavily fined.
The second rule of thumb is never have out more than one payday loan at a time. Having more than one will definately get you into a financial hole very quickly.
Do some research before deciding which establishment to use.
Find out if they will hold for 30 days. Many payday loan companies only hold for 2 weeks strictly. That means that if you are paid monthly or odd times, like the 10th and 25th, you will always be late with them. You do not want them to deposit your check before your check hits the bank.
Find out if the payday loan company offers a first loan free. Having your first payday loan free is a big advantage. Many payday loan companies offer your first loan interest free as an incentive. Usually, when recieving and interest free loan means that if you are on time on paying out your loan, they will pull all of the fees off. But, understand, that if you are late, even by 1 day, they will charge you for the loan and the interest.
Find out if the payday loan company offers incentives. Some payday loan companies offer incentives such as a rebate after so many loans, generous referrals, monthly giveaways. All of these incentives are money in your pocket.
Ask people that you know if they have any dealings with a certain payday loan company. There are many companies out there and they are all different. Some offices do well because the person working them are kind and will work with you. Some offices do well because of the tactics they use. Find someone who has one and they will tell you how good the company they use is.
With all of the information that you have gathered, it is time to put together the things you will need to obtain your payday loan. The requirements are simple. You have to have to show an income, show proof of residency (usually an electric or water bill), 2 IDs, and a current checking account statement. Be prepared to offer more than 1 paycheck or more than 1 bill. For some payday loan companies you will have to have been at your job for mor than 6 months and your account has to also be at least 6 months. Some companies are strict on this and some are not.
Even though a payday loan company says that they don't run credit checks, they may still run, what is called a teletrak. A Teletrack is like a credit check that covers payday loans, Title loans, cable bills, car loans, rental furniture, etc. If you defaulted on a payday loan, it would show up as a charge off and you could be denied another loan by the new company.
This is the way a payday loan will work. You go in and write a check and the company will hold it for you until the due date. Make sure that you ask that your due date is also your payday. Like I said earlier, you do not want them to deposit your check before your deposit hits at the bank. Normally, you will go in with the entire amount of the check written in cash. Make sure you get a reciept and make sure you keep it in a safe place. If at the time that you pay out your check, you still find yourself short, you can write another check and recieve the original loan again until your next payday. That is the trap.
You must be asking yourself how you can avoid this. I am going to give you an example of the best way to handle this. Let's say that you have a payday loan for $150. When you are paid, you will pay the $150 plus the fee. (The fees vary from state to state-In Mississippi it is approxiamately $21.95 per hundred.) Instead of turning around and getting another $150, go down $25 and do one for $125. If you do this everytime, you will eventually be able to get it low enough to pay it out with out hurting too much. I have offered this option at my office for quite some time. It amazes me when people tell me that they were never told by other companies that they were allowed to do this. You are allowed.
Another way to avoid the payday loan trap is to pay it out in full and walk out. If you need money again before payday, you can always go back. Only get what you need. A good rule of thumb here is to never get more than 25% of one paycheck. If your take home pay is $600 every two weeks, then don't take out a loan any higher than $200. Most payday loan offices will go down as low as $50.
I have managed a payday loan office for many years. I know that there are unethical places out there, and I just want you to be aware that although payday loans can hurt you, used responsibly, they can help you tie your financial ends together.
There are some people who do not qualify for a payday loan. If you are military or a dependent of a military, if you are self employed, if you work part time, or if you are under the age of majority.
I hope that I have help to clear some of the mystery of payday loans. Just remember these few things. Do your research, ask questions, NEVER go to an online lender, never take out more than one, Never take out more than 25% of your take home pay, and always make sure that your due date falls on your payday.