Category Archives: Cash Loan

The Effect of Predatory Lending Practices on Payday Cash Advance Consumers

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If you think the economic recession is an advantage to payday cash advance lenders, think again. The recession had a bad effect on lenders because of the increase in the unemployment rate which has affected the ability of consumers to earn money. Their customers don’t have any source of income and are unable to pay their loans and other bills. Eventually, some consumers will declare bankruptcy. When this happens, there is nothing a lender can do except to get what they can extract from the borrower and in many cases there is almost nothing.

Because of this, many lenders have increased their screening process for approving applications and limited the number of loan approvals. In fact, even a good credit rating or sustainable income won’t assure a payday cash advance applicant of getting approved for a loan.

So many consumers turn to lenders who easily approve loans. Many of these consumers have fallen for lenders who are into predatory lending practices. These loans come with easy qualifications but the interest rate is very expensive and may be debilitating to a consumer. In fact, some consumers end up losing their property or declaring bankruptcy. The result is that consumers who work with lenders that are into predatory lending practices find themselves deep in debt for many years because of the steep interest rates.

Many have fallen into predatory lending practices because of convenient and quick services with less documentation required. Some don’t even ask you to fax your documents. The personal information you provide online is sufficient for the processing and approval of your loan. As long as you can provide them with proof of your source of income, your loan application will be easily processed.

However, the consequences of working with lenders who are into predatory lending practices are detrimental. The interest rate may be more than the 10% range, excluding late penalty charges. If you are unable to pay on time, the interest rate easily piles up leaving you to pay more than you have actually borrowed.

Also, you can’t easily walk away from these lenders. They will hunt you down until you pay them. They hire collection agencies who repeatedly ask you for your payment by make annoying calls at home or at work. They will also send you letters by mail to collect payments. They may falsely threaten you with check fraud and threaten to put you in jail in order to make you pay. There are some lenders who threaten you by saying they will call up your employer which creates a bad impression on your employment status and may ruin your career.

Prevention is the key to avoid getting into trouble when working with lenders who are into predatory lending practices. Consumers must avoid them even if they are the last resort for a financial resource. There are still other options that will not put consumers into serious financial trouble. For example, there are non-government and government organizations that have been given the responsibility to assist those in deep need of cash assistance. Most of these organizations offer loan modification and refinancing with low interest rates and affordable costs.

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.

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.