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How to Get Out of Payday Cash Advance Debt

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Oftentimes, borrowers get into trouble after getting a payday cash advance. The trouble they get into is usually associated with payment defaults. They go through repayment options, like rolling over the loan and applying for debt consolidation loans because they are unable to get out of debt.

Payday cash advances are supposed to be a great way to get instant cash with less hassle. All types of borrowers can qualify since there are no credit checks. However, the only pitfall in getting payday cash advances is the high interest rates charged and the very short repayment time. This is why they are considered in the market as sub-prime loans or loans with high risk.

So how do payday cash advances make their borrowers unable to get out of debt? These short-term loans trap a borrower into a cycle of multiple and repeated debt. Since the rate of interest is expensive and the repayment schedule is abrupt, many of these borrowers incur late fees which are charged with additional interest and fines. Moreover, since the terms and approval time of most payday cash advances are not strict compared to banks and credit unions, many borrowers are tempted to borrow more than they can repay.

Getting out of debt is a difficult thing to do especially if the borrower owes a large amount of money. There are many experts and even forums that discuss the issues about payday cash advances. They recommend borrowers seek help from debt consolidation and settlement companies. However, the truth is that most of these companies just want their commission and won’t help you get out of debt. There are other practical and affordable ways to help borrowers get out of debt easily. Here are some helpful hints on how to do it:

1.    The best way to get out of debt is doing it on your own. In order to ensure that you are doing it the right way, you may consult your accountant or a lawyer. Initially, make a list of all your debts and calculate your current expenses. Find out how much you owe, how much you have, how much your expected paycheck covers along with how the late fees are charged by your lender.

2.    Next, make a repayment schedule where the oldest and those debts with the highest rate of fines and fees are paid off first. To do this, you need to make a table with 3 columns, where the first column indicates the name of the lender and the account number, the second column indicates the term of your loan debt (in months), and the third one the fines charged. Arrange each of your unpaid loans in descending order with the highest interest rate ranked first.

3.    Then, start repaying the unpaid loans. At the same time, send a letter to your lenders and inform them that you can repay the loan partially and give them a specific date when you will be able to repay the entire loan. As soon as the lender grants your request, do what you promised. This shows that you will abide to your promise and gain the trust of the lender with your honesty.

4.    If after listing your debts you find that you will have difficulty repaying the loan, you may bargain for a low settlement amount with your lender. Lenders will work with you as long as you communicate and cooperate with them.

5.    When your paycheck isn’t enough to sustain the expenses incurred for your loan repayment, you might consider getting an extra income, like doing overtime, applying for part-time jobs, making money online or have a garage sale. Also, tighten your budget a little bit more and get rid of anything that drains your finances.

To pay off your payday cash advance loans and get out of debt is not impossible as long as you have the determination to do so. Avoiding payday cash advances may not be a good option since these are great resources for immediate needs. So be careful to keep you income to debt ratio within your repayment power.

Managing Errors found in Your Credit Report

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Most consumers of payday cash advances are advised to refer to their credit report before and after applying for a loan. This is important in order to track any credit reporting errors that may possibly hinder your lending opportunities. You can request for an investigation to correct these errors.

The Fair Credit Reporting Act or FCRA protects consumers against credit report errors, inaccuracies and other violations. During the early days of credit reporting, lenders and creditors provided reports in cryptic forms to credit bureaus. However, consumers were not allowed to see these reports and if they could, they could not be understood. This is why in 1970 a law was passed to address unfair practices of credit bureaus and creditors. Under the new law, consumers now have the right to see their credit reports and are allowed to dispute any incorrect information.

If you want to dispute any information on your credit report, report this immediately to the credit bureau that made the report or else this will remain on your credit history. Also, when you request an investigation on a credit report error, make sure that you are able to provide additional documentation to support your dispute. If you dispute an error without supporting documents, the credit bureaus have the right to refuse the investigation.

Consumers of payday cash advances should report any credit report errors because this is their right. In fact, the Fair Credit Reporting Act gives consumers the right to add a statement to their credit report. This is used to explain any errors or inaccuracies that will alarm credit bureaus. In case credit bureaus do not act despite a consumers constant requests, he has the right to file a complaint with an attorney general and report any unfair practices.

The federal law requires credit-reporting agencies to investigate any information of a credit report error and give the consumer updates and written findings. Within 30 days, the credit bureau should contact the responsible creditors about the credit report error. The creditor will also conduct their own investigation and notify the credit-reporting agency of their findings. When errors have been verified, the errors should be removed from the consumers credit report immediately. If the consumer is not satisfied with the results of the investigation on the credit report error that was found, he may file a lawsuit against the creditor who reported the inaccuracy.

So what credit report errors can be disputed by the consumer? All inaccurate negative information can be disputed by a consumer. It is also important that consumers know that these negative items will only be on your credit report for 7 years. Also, inconsistencies on reports from old accounts with charges, late fees, or any judgments can be disputed. Consumers should also know that late payments beyond 30 days are the only ones that will remain on your credit report for 7 years.

Check your credit report to ensure that any old charged off accounts, late fees, or judgment roll offs on your report are the correct amount. Only late payments that extend beyond 30 days can remain on your credit report. Also, each delinquent account reported on your credit score should reflect an accurate amount. Reference your old billing statements to ensure accuracy. If you are a victim of identity theft, you can dispute any unauthorized accounts opened in your name.

How to Establish Good Credit Scores

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When applying for loans, whether in banks or lenders of payday cash advances, credit scores are an important requirement. In banks, loan applicants with good credit scores are easily approved. Lenders of short-term loans, such as payday cash advances, do use credit scores to determine credit worthiness but they use your credit history.

So what is a good credit score? A credit score helps establish your credit rating as perfect, excellent, good, fair or bad. These scores are used by lenders in determining your level of risk. The usual range for credit scores is from 300 to 850. The rationale is the higher is your credit score, the less risk you will give to your lender. How do you get good credit scores? The answer is simple. Pay your debts on time and avoid bad credit (foreclosures, bankruptcy, liens, and repossessions).

Establishing a good credit score is a process. Here are the things that you should do:

1.    Find out the elements that can affect your credit score.

There are 5 categories that affect your credit score according to FICO: 1) payment history (35%), amount of debt (30%), length of credit history (15%), new credit lines (10%) and types of credit used (10%). These will help determine what your credit score will be.

2.    Make timely payments on your existing debts.

Payment defaults will reflect on your credit report. If you are 30 days late on your obligation, expect that your credit score will be lowered in the range between 60 to 110 points. Also, you will incur additional charges and late fees that will make your debt more burdensome.

3.    Avoid collecting numerous debts.

This means that you should avoid too many debts. Remember that 30% of the calculation of your credit score is determined by the amount of debt you owe. Even if you make your monthly payments on time, you will still get a low credit score because of so many accumulated debts.

4.    Keep your credit card accounts, even with zero balance, open.

Existing credit files, even old ones, can be good for your credit score. Even if you pay off a credit card and do not close it out. However, in some cases closing old accounts may lower your available credit and your credit score in the process. The length of your credit history will be a big help for your credit score in the future.

5.    Use one type of credit at a time.

New credit lines compose 10% of your credit score. So when you apply for different types of credit accounts such as mortgages, car loans, credit cards and payday cash advances, this can affect your credit. If you intend to apply for new credit, wait at least 6 months.

A good credit score offers many benefits. It opens door to many opportunities. Establishing a good score is not difficult as long as you have the determination to do so.

Will Non-Payment of Cash Advance Loans Put You in Jail?

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In a recent news article there was a story about a breast cancer survivor who was put in jail because she was unable to pay for her medical bills. According to reports, she got a $280 medical bill and she was unable to pay for it. So the bill was turned over to a collection agency and when she refused to pay, police took her to jail in handcuffs.

In 1830s, the US government abolished debtors prisons. However, today there are more than one-third of the states in US that allow people who have unpaid loans and bills to be put in jail. In some states, such as in Illinois, debt collectors have used public courts, sheriff’s deputies, and country jails to pressure people with unpaid loans and bills to pay their debt or they will be put into jail.

Under the federal law, no one can be put into jail for unpaid loans, such as cash advance loans. However, when debtors force the case into court, the defaulting person is at risk to be put into jail when he fails to respond to the court summons and pay legal fines. He will be charged with “contempt of court”.

According to Illinois Attorney General Lisa Madigan, “Creditors have been manipulating the court system to extract money from the unemployed, veterans, even seniors who rely solely on their benefits to get by each month. There are a lot of people who have been put into jail because they’re too poor to pay their debts and we should not allow these illegal abuses to continue.” Currently lawmakers are planning to pass a bill that would make it illegal to put people in jail for debts and unpaid loans.

In the 2010 report of the American Civil Liberties Union, they surveyed 5 states (Georgia, Louisiana, Michigan, Ohio, and Washington) and found an increasing number of people being put into jail because of unpaid loans and debts. According to the report, debtors prisons are flourishing even after the Supreme Court has prohibited the practice.

The good news is that not all lenders want to put debtors of cash advance loans into jail. They found that when a debtor is put into jail, they won’t be able to pay the debt. The most suitable option that lenders turn to is to work on repayment options with the borrower.

The sad truth remains. The non-payment of loans and other debts are effects of the recession that struck our country. According to Mardigan, “More people are unemployed and more people are struggling financially.”

The best help to prevent imprisonment of persons with unpaid loans, comes from their own initiatives. Unless people learn how to pay their cash advance loans and other debts responsibly, they will worry about being put into jail.

New Bill on Payday Cash Advances

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Most of the payment defaults that borrowers of payday cash advances incur are due to the short repayment periods. High fees are also big contributors to defaults because borrowers couldn’t afford to pay for them in a very short period of time. New bills have been passed in the US Senate to address this problem. Borrowers will have more time to repay their payday cash advances and the fees associated with them are limited.

The two new bills will impose new regulations on the payday loan industry. According to Sen. Joseph Keaveny, “The bills are attempts to address the industry’s worst abuses by requiring a minimum repayment period of 90 days and a state database to monitor lenders. This is to allow payday cash advances to serve as an emergency lender. Let’s hold them to what they call themselves.”  Keaveny and Sen. John Lamping are the co-sponsors of the bills.

Aside from the 90-day repayment period given to payday cash advances, the bill will also prohibit borrowers from having more than one outstanding loan at a time. This means that rollovers or the renewal of payday cash advances every 2 weeks with additional fees, will be prohibited. This is to urge borrowers to make regular payments. According to Sen. John Lamping, “This might be that one year after so many years where the industry makes a serious attempt at self-regulating.” They hoped that this bill will be the crucial firsts for reforms in the payday loan industry.

The existing state laws have allowed lenders of payday cash advances to give their borrowers a repayment period of 14 to 31 days secured by a post-dated check. Most of these loans cost their borrowers about $17 to $20 per $100 borrowed. Additional fees are charged if the borrower renews the loan for an additional two weeks.

However, there are pitfalls in these bills according to some. Rep. Mary Still doubts if the co-sponsors (Lamping and Keaveny) have a bill that will put a dent in the problems she sees with the industry. It has been proven that when fees are limited and interest rates are capped at 36% APR, there has not been any sign of eradication of predatory practices among lenders. The bill may be a great initiative, but it may not be enough. “I would be interested in working with them on a compromise,” Rep. Still added.

But there are others who support the bill, such as James Bryan of the Missourians for Responsible Lending.  He said the bill is a good initiative for payday cash advances to move from being a scourge on society to helping in the right direction. Randy Scherr from the United Payday Lenders of Missouri also added, “If the bill drives the industry out of the state, then it will cut off emergency credit to people with no other means of obtaining it. So, this bill needs further study before total implementation.”

For borrowers of payday cash advances, it is important to know the inclusions and the limits of this bill to have an informed choice. For lenders, it will be helpful if you also read the terms enclosed in this bill. And for legislators, think of a win-win scenario for both the consumers and the lenders.

Payday Cash Advances Keep Borrowers Returning

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The repayment option of rolling-over the previous loan into a new loan that lenders offer to their borrowers has resulted in the repeated borrowing of most consumers of payday cash advances. A survey reveals that 38 states in the US permit interest to be charged at triple-digit annual average rates.

Usually, when a borrower plans to take out a payday cash advance, he usually includes in his postdated check the interest fee and the principal amount. The lender will hold the check for about two weeks or until a paycheck or Social Security payment is issued to the borrower. Once the borrower receives his paycheck, the lender deposits the check as repayment of the loan. This is the way payday cash advances should work.

However, a report from the Center for Responsible Lending reveals that 90% of borrowers of these small, short-term and high-cost payday cash advances, practiced repeated borrowing. In fact in the state of Virginia, it was found that 85% of payday cash advance borrowers returned to the same store in the same year for about a dozen times.

According to Jay Speer, the executive director of the Virginia Poverty Law Center, this is a strategy of payday lenders. He said, “They set it up so you have to pay the whole thing off in two weeks and they know you can’t. It’s bad enough that the interest rates are 380% APR, but the worst part is that they trap you.”

Originally, payday cash advances were designed to meet an emergency need only, that’s why they have shorter terms, usually two weeks. However, many borrowers have used repeated borrowing because they are unable to pay within the allotted time. From this point of view, borrowers are the ones to be blamed for getting trapped into the cycle of debt.

According to Jamie Fulmer, investor relations director for Advance America, Cash Advance Centers Inc., “If you look at our target customers, they are middle-class working Americans who for whatever reason get caught between paychecks without alternatives.”

The payday cash advance industry has profited for the past years. Last year alone, the industry generated about $6 billion in fee revenues and $40 billion in loan volume at 23,000 stores. An estimated 24% increase was seen on their net profit from the previous year. About 70% of this profit is estimated to be coming from fees and income of repeated borrowing.

The growth of repeated borrowing among consumers of payday cash advances is quite alarming. A report shows that consumers receiving between 2 to12 loans last year rose to 23%, and those receiving more than a dozen loans rose to 19%. Why such an increase in repeated borrowing? This may be the question that only borrowers of payday cash advances can answer. Consumer advocates say that lenders attract customers because, unlike banks and credit unions, payday loans have fast approval rates, ask only a few questions and you don’t need good credit scores. As a result, many people patronize these financial products and have been repeated customers.

The government and consumer protection groups have been working extensively to prevent borrowers of payday cash advances from being trapped in debt. However, these borrowers also need to be educated to make informed and wise decisions. This will be the key to save them from drowning in the well of debt.

Payday Cash Advances| Cheaper than Bank Overdraft Fees

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It may sound unusual to say that the cost of paying for a payday cash advance is cheaper than paying for an overdraft fee in banks. The Federal Deposit Insurance Corporation (FDIC) published the results of their two-year study regarding the use of overdraft programs operated by their supervised banks. Their study revealed that a typical bank has overdraft fees that are more expensive than paying interest fees and other additional fees for a payday cash advance.

The FDIC is managed by a five-person Board of Directors, who are directly appointed by the US President and confirmed by the Senate. This study by the FDIC on Bank Overdraft Programs was initiated in 2006. This is in response to the rapid growth of automated overdraft programs where the bank honors a customers overdraft obligations by using standardized procedures through non-sufficient fund (NSF) transactions. All data and information gathered was based on a survey from 1,171 FDIC supervised banks and separate data requested from customers from 39 other banking institutions.

In the study conducted by the FDIC, they have found that a typical NSF check can result in overdraft fees and interest as high as 3,500% APR. These are the results of the study:

  • $20 overdraft fee = APR of 3,520%
  • $60 ATM overdraft = APR of 1,173%
  • $66 check overdraft = APR of 1,067%

In addition to these numbers, the study revealed that most of the customers who incurred these charges belong to the low-income with a median annual income of less than $30,000. Furthermore, the study also found that, unlike payday cash advance companies, at least 75.1% of banks automatically enrolled customers in overdraft programs that carry APRs and other fees more expensive than a typical payday cash advance.

Other essential findings that the FDIC revealed in their study include the following:

  • 90% of the banks surveyed allow NSF transactions without informing the consumers and less than 8% of  the banks inform consumers that funds are insufficient before extra charges are imposed.
  • There are about 12.5% of banks who have received consumer complaints about automated overdraft programs.
  • 9% of consumer accounts have (10) NSF transactions during a 12-month period and 4.9% had (20) or more NSF transactions. The accounts who incurred 20 or more NSF transactions were charged $1,610 per year.

This study by the FDIC shows that payday cash advances are a good and reasonable financial resource option. It shows that they have significantly less expensive rates compared to traditional bank overdraft fees. This retaliates the claims of some critics that these types of financial resource are expensive and predatory. Even so for several years, consumer advocacy groups like the Center for Responsible Lending (CRL), have relentlessly campaigned to ban payday lending in the country which leaves consumers with no other option than to pay expensive bank overdraft fees.

How Cash Advance Lenders Help Consumers with Financial Freedom

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The financial difficulties experienced by many people today due to the economic crisis is the ultimate reason for the services of cash advance lenders. Because most of these payday cash advances are short-term and due within two weeks, many of these consumers are unable to comply with their obligation. They make payment defaults and ruin their credit scores.

Having low credit scores is detrimental. Consumers who are looking for more favorable loan terms are unqualified to apply for these loans. They may also be deprived of some benefits that require higher credit scores. The Community Financial Services Association of America or CFSA has created a program to help payday cash advance borrowers build credit through a new credit reporting agency that tracks their loan payments at no extra cost.

With over 164 affiliated cash advance lenders and financing companies, CFSA helps consumers find financial freedom by inproving their credit scores. How can they do this? The CFSA has partnered with PRBC, a consumer credit reporting agency, also called the credit bureau which is similar to the other four U.S. credit bureaus (Equifax, Experian, TransUnion and Innovis). In contrast to these popular and established credit bureaus, PRBC allows their consumers to self-enroll and report their payday cash advance payments and other debt payments. Consumers can also report payments for bills such as rent, utilities, cable, telephone, and insurance that are usually not reported to the other bureaus. Timely payments will help increase your credit score.

Billy Webster, CFSA board member, has been very proud of this program. He said, “More than 50 million Americans have low or non-existent credit scores, denying them the opportunity for equal participation in the mainstream economy. I am delighted that through this initiative we can help our consumers build their credit history.”

Today, traditional credit reporting agencies do not track or consider the payments for bills such as rent, private mortgages, utilities, telephone, cable TV, and child care for computing credit scores. So, people who make timely payments on bills, but not on loans or other financial products, are deprived of affordable home loans, auto loans and insurance. Sometimes, your credit score may affect getting employment or the amount of the deposit required for new utilities.

So how does PRBC works? PRBC services track payments of payday cash advances and other recurring bills by producing a Bill Payment Score or BPS which can be used to supplement a traditional credit score. The BPS is designed in such a way that consumers can easily understand the terms and the contents. Please take note that PRBC is free and does not charge a consumer for enrollment into the service or to view their own data.

The creation of the PRBC is answer of payday lenders to the summons of the federal government. For several years, the U.S. Congress has been proposing legislation on how to help consumers get out of debt and being the prey of payday lenders. Before the actual formation of the PRBC, State Representative Susana Mendoza, proposed in a hearing of the House Subcommittee on Financial Institutions and Consumer Credit, to require payday lenders to include credit reporting and  find an alternative data source to help consumers build their credit histories.

With the creation of PRBC, she said in an interview, “I am thrilled that CFSA recognizes the need, not just to help payday cash advance consumers get by financially, but to help them get ahead. That was the goal of my legislation, and I’m delighted to see CFSA put the idea into action.”

The creation of the PRBC services, through the initiative of CFSA, helps consumers of payday cash advances to achieve financial freedom. In fact, it has the strong support of consumer advocates as iterated by William McNary, the Co-Director of the Citizen Action in Illinois, “Through this initiative consumers who lack the opportunity will now be able to start to build a credit history. We appreciate the industry’s commitment to continue to improve their service.”

With Payday Cash Advance Loans You Will Not Be Brought Down By a Financial Crisis

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Today, millions of individuals from all over the world are affected by the global financial crisis. Even America is not spared from the crisis which has left millions struggling with their personal finances.

According to a recent Federal Reserve report, more than half of all American families are struggling with more than $75,000 of unpaid obligations mostly from mortgages, credit cards and loans, totaling $11.5 trillion nationwide in consumer debt.  According to a recent survey conducted by PNC Bank, many young Americans between 18 to 35 years old are already hooked on card debt with an average balance of $40,000 per individual.

So how do you cope with debts and expenses?  For those employed, getting a payday cash advance loan is a convenient option.  By taking advantage of payday cash advance loans, a borrower is able to acquire needed cash as soon as possible.

Borrower just need to apply for a loan online, fill-out an online application form from the loan provider of his choice and in less than an hour, cash is transferred to his bank account.  Purchases or paying bills can now be done quickly.

No qualifying documents are required to be submitted to qualify for a loan. Even individuals with low credit scores are welcome to apply for a cash advance loan. Meaning, even if the borrower has a very low credit score, he is still entitled to apply for this type of loan program.

With payday cash advance loans, spending is controlled.  A borrower is not tempted by a situation where he can run up a huge balance. The borrower knows how much would will be billed for his loan payment on his next payday.  Whatever is written in the contract is precisely the amount that will be paid.

Payday cash advance loans are designed to be paid within one or two payday periods.  Paying your payday cash advance loan as soon as possible reduces the overall costs and improves your credit score.

As a responsible creditor, you must deal with commitments in a responsible way. Payday cash advance loans are not to be used in a frivolous way.  Have a plan on how your money will be spent and stick to that plan. Undoubtedly there will be more hard times ahead. What matters is to use all possible means to cope and get back on track. There may be more bumps ahead before you can achieve your financial goals but by taking the right steps to deal with your finances, you will get back on an even keel.

Resilience Coupled With Payday Cash Advance Equals Financial Stability

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More and more individuals are worried about their family’s future.  Even those who are fortunate enough to be employed are not alien from the struggles of paying off financial obligations.   Many have significantly cut down on their spending including credit card usage. This is due largely because of the increased costs that come with borrowing cash from credit cards.  Loans made through banking institutions whose interest rates are sky rocketing and you have to go through form and form in order to apply for a loan are not very convenient either.

So what is the best alternative to meet your monthly obligations, even before pay day?  How will you pay your monthly mortgage when what you’re earning is no longer enough to cover all your regular monthly expenditures?  How do you keep up with utility bills whose due dates fall just before pay day?  What are your best options when faced with these kinds of problems?

One of the most popular convenient financial solutions are online payday cash advance loans. This short term financial option is usually used by borrowers for paying for crucial financial obligations like medications, house improvements, expensive car repairs,  costly medical bills or any emergency expenditure that comes up unexpectedly.  It does not really matter how the money is used.  The borrower is given the prerogative how he wishes to utilize his loan.

According to an analysis made by creditcards.com, the usual borrowers of payday cash advance loans are those employed individuals who make over $47,000 a year and have been employed by one employer for more than four years. This is contrary to the notion that payday cash advance loans are intended for those in very low income brackets.

In a recent study made by a Wallstreet analyst, is was found that the average payday loan borrower makes an average of 11 transactions in a year using deposits and withdrawals.

Payday Cash advance loans do not require collateral like houses, trust funds, bonds. Although the interest rates are much higher than regular secured loans, they are definitely lower than what most credit cards charge. This type of loan risk is usually at the medium level.

If you pay your loans late or you fail to pay for your loan, your loan provider will still charge you additional interest along with fees and put a ding on your credit rating. Payday cash advance loans are the best option to consider when you opt to pay off higher or variable interest debt for a lower fixed rate payment.

Remember, the heart of any recovery is your attitude towards every crisis. By being resilient and keeping a tight leash on spending you will have a good remedy to an ailing financial situation.