Many people find themselves in the situation when their expenditures exceed their income and bills pile up and there is no way out of it. However, even in such unpleasant moments solutions can be found. One of them is payday loans – short-term small cash loans that can be taken very
Different states have different attitude to such type of lending and some states are more lenient while others are more restrictive. The Consumer Financial Protection Bureau provides a lot of information on the account of these law regulations and laws as well as interest rates and maximum law amounts. In some states where laws are softer the APR can reach up to 900%.
Payday loans are offered at very convenient terms and they are also easily available to customers with bad credit. Which is one of the reasons why so many people choose them as an option; and especially when there is no other option. However, due to their unsecured and short-term nature these loans are also very expensive and therefore are pretty much despised and disapproved by many.
Many opponents say that loans are predatory in nature as they frequently cause a person to become more indebted than before; however, the loans have one and very advantageous side – they do actually help people in the state of financial emergency. And they are also available for any situation without delays or hassle or any paperwork and checks that are involved in a traditional credit-making process.
The thing about payday loans is that before you actually take any make sure that the company is reliable. This is where Better Business Bureau (BBB) information can help.
BBB represents a reputable and reliable source of business information. They take their responsibilities seriously and they never give accreditation to doubtful and unreliable businesses with dubious and shady nature.
The companies that are listed and marked as BBB accredited are actually checked and found ok. Which means that it is better to apply to those lenders who took a trouble finding such accreditation.
Next thing is reading customer feedbacks. All BBB listed businesses have all the feedbacks and complaints listed on the page so that you can see whether people are generally satisfied with the service or not.
One of the most essential things about payday loans is that a legal and reliable lender never asks for an upfront fee. Which means that no prepayment or wire transfers via any money transfer agency should be required. If you are asked for a prepayment, do not deal with this lender, they are very likely to be scam.
In order to borrow wisely, make sure that you take exactly what you need and not more. The thing is that extra money is very easy to spend and not so easy to return. Too large a loan can become a very serious burden for your income and can lead to delayed repayments and roll-overs – and this is where the tale about predatory lending, possibly, starts.
If you decided to take a payday loan, make sure you read the contract carefully and especially the fine print. Besides, keep all the papers that refer to the process in one place. You never know when you may need them. Keep in mind that you have BBB to file a complaint to in case you come up with a fraudulent lender.
Bad credit represents a serious problem for many people as it is a complication on the way to get your financial issues fixed in general and it also closes the doors to any loan in particular. Credit scores play essential role in the modern world and bad credit is inadvisable but unfortunately pretty frequent situation nowadays.
In this light many borrowers have to resort to the alternative lending options as banks do not favor bad credit applicants really well. Payday loans are well-known in this respect; however, they are not the only ones to rely on.
First of all, there are personal loans that are offered not by banks. They can be credit union loans or some of the kind. They do look at a person’s credit score; however, they are more lenient to their applicants and can grant loans in the situations where banks refused.
Mortgage is a complicated matter when it comes to bad credit; however, one can still try to get a loan with poor credit score. It is better to try working with a mortgage broker first in order to get the idea of your options.
Bad credit auto loans
These are loans for car buyers at not very good terms. Bad credit applicants get higher rates and smaller loans; however, many are still eligible for such loans.
Car title loans
These are different type of auto loans – they are similar to payday loans in the way that there is no need in collateral or co-signers and they are higher prices in terms of interest rates. They are also short-term and are not very favored by law-makers exactly for the same reason as payday loans are. However, car-title loans represent a good option of a loan for those borrowers who do not have much of a choice and can be used as an alternative by those who own a car and need cash fast.
How to Find the Best Bad Credit Loan
There are several factors that should be taken into consideration when one searches for a bad credit loan.
- It makes more sense to look for the lenders who offer larger amounts as the rates are high, it is more beneficial to have an option of a larger loan.
- APR is usually high with most lenders who offer loans to bad credit applicants; however, it makes sense to look and compare as different lenders have different rates and it is possible to find the one that is fair.
- The same refers to fees – some lenders charge late fees, others do not. Before applying for a bad credit loan, check all the possible options.
- Terms are also important. Most bad credit loans are short-term and they are supposed to be repaid in a month or a fortnight. Some lenders allow extensions and in some state roll-overs are not permitted (e.g. for instance payday loans in some states are not supposed to be rolled-over). Make sure you read fine print before choosing the option.
- Reliable and reputable lenders disclose all the aforementioned information on their sites and don’t hide it from borrowers.
- Opt for lenders who have wider reach and better reputation; small ones are not always reliable.
- Reputation is not the last thing to consider. Take time to research the information about the company, read customer feedbacks and official reviews. BBB accreditation is also a very great advantage when it comes to bad credit lenders; however, not all companies have it as it is not obligatory legal accreditation. Still, it is better to deal with a company that has a BBB seal.
It is common to think that bad credit once ruined closes all lenders’ doors; however, it is not so. There are options for those customers who appeared in a financially complicated situation and they are numerous.
It is no news that payday lending is a very hot and controversial subject and it seems that the discussions around it are becoming even more heated. At the present moment the Consumer Financial Protection Bureau is working on a new regulation that is meant to end payday lending operation as it is. Surely, the opinions are not entirely unanimous on the subject; however, the proponents are in the minority.
Payday loans are frequently described as predatory and ugly and they are more expensive than any other average loan option; however, the question is how much such emotive and subjective epithets can actually reflect the nature of this credit option.
Although not deprived of some truth, this notion is not altogether truthful. The attitude is subjective to a very great extent as government and all payday lending opponents judge in a one-sided way – they do not seem to see how many people actually rely on this option when no banking alternative there is. The opponents miss one of the major points of the puzzle – by closing payday loan stores you basically shut a great deal of people off the cash access.
The figures presented by such reputable agencies as Pew Charitable Trusts are very eloquent on this subject – there are about 12 million people using payday loans in the U.S. and they take as much as $7 billion annually. This amounts to the following figures – about 5% of the U.S citizens rely on this credit option. It is not a small number, actually. Payday loan stores are getting as popular as fast food restaurants and even more popular.
Taking that into consideration one should understand that all the opponents that seek for payday lending business elimination prefer to be blind in certain ways. The thing is that payday loans are expensive and many people seem to overestimate their potential; however, this is not actually the reason to call the sphere my emotional epithets such as predatory.
Payday lenders do not grant loans to people under the age of 18; thus, it seems likely that a person, a borrower is able to make a decision for themselves – whether the latter is good or bad no one should judge.
According to the numerous payday loan opponents suggestions, payday loan borrowers are either illiterate or fools with no knowledge of the subject. Yet again, it does not seem to correlate the reality. It looks like payday lenders seek for the people who are unable to repay with the purpose to make them pay longer and larger sums. However, this notion lucks some sense.
The thing is that the number is still here – 12 million people use payday loans on an annual basis and recent survey carried out by Columbia Law School and Ronald Mann. The survey described the attitude of borrowers to payday loans they take and their potential to estimate the time when they will be able to repay a well as failure to do so.
The research showed maybe not the most demonstrative but still pretty informative results that about 60% of borrowers have been well aware of the prospect of a rollover when they took a loan and they still decided to go on; moreover, most of them were able to make a repayment in time or with a week’s delay at most.
The thing is that there is no actual problem with payday lending regardless of the fact that various complaints are piling in (they can also be from those borrowers who simply seek a way to lower their payment).
Still, the CFPB seems to be very determined about its decision that will lead to shutting down many loan places. Such regulations are already practiced in several states; however, they are not the same for the entire country yet. But they may become. There may be rules introduced that involve easy repayment options and lower rates; however, none of the officials actually offer any alternative to the industry.
At the present moment there is not a single other option that would offer loans of $300 to $500 on average for such short term as a fortnight and without all the paperwork involved. It looks like the government does everything to evoke a market failure in order to take its place with their own product. This is all about dividing a market and everything is covered by the noble notion that small private companies can’t be trustworthy; on the other side, agencies that are backed with taxpayers are trustworthy for a change.
The question of payday loan legality and their right for existence will not seize to be discussed; however, it really looks like those who vote for the industry elimination do not do so solely from the point of view borrower benefit. There is much more to the subject.
Yet again changes are being awaited in the state of Alabama with regards to payday loans. At the end of October Mobile organization leaders and legislators met for the discussion of the topic that has long been bothering everyone – payday lending in the state. There has again been introduced a suggestion to cap payday loans at 36% and in doing so to make an attempt at a more effective regulation in the sphere.
In August the Alabama Banking Department started tracking payday lenders and even succeeded with the law that allowed loans not more than $500 a time. However, statistic is still pretty high as in accordance with a recent research about 462,209 payday loans were taken recently with the total loan amount about $146 million – all this for the period of ten weeks.
There have been many complaints about high interest rates of payday loans and also short term of their repayment; however, the opinion differ mostly because there is no alternative to such loans that consumers can rely on in the same way. Still, it seems that the majority is in favor for better consumer protection and stronger regulation.
Alabama Appleseed company votes for the stricter laws for payday lenders as the numbers are really impressive and not in a good way. The representatives suggest that step should be made to make the industry more affordable and less stringent for customers; however, they do not see payday loans elimination as a way out.
At the present moment the following steps are discussed: to cap payday loan interest rate at 36% instead of the 3-digit number interests in APR payday lenders can charge at the present moment. However, the owners of payday loan businesses do not see it like a beneficial solution. They say that it won’t help consumers at all as there is no alternative to small cash loans like this and with the introduction of 36% cap lenders are likely to close their businesses and people will have no option whatsoever. It happened in several states already.
At the present moment payday loans online are getting more and more popular and as many as 50% of all credit transactions are made online. The problem is that many people tend to take one such loan and after failing to repay in time, they have to take another or roll-over. This is what makes the industry so dangerous – it gets a lot of people into a debt circle.
Similar attempt at introducing stricter payday loan legislation was made last year; however, it was unsuccessful. It will surely be the issue in the next legislative session; however, in the meantime payday loans are still available and their high interest rates and short repayment term don’t stop customers.
The Federal Consumer Protection Bureau tends to impose more and more regulations over payday lending recently.
The research shows that about half of borrowers were in need of a second loan after the first one was taken and a fortnight has gone. In this respect the authorities are looking for the ways to make the borrowing process less stressful.
The goal is to manage the loan repayments and service system in general in such a way that borrowers could be able to make repayments timely and easier and to make loans more affordable in all senses. The bureau also seeks ways to limit the operation freedom of payday lenders in all possible ways.
One of the names that CFPB calls payday lending operations is “abusive collection practices” and it is the reason why the claim that reforms are needed and badly. They also say that the type of repayments payday lenders offer are easy and quick; however, they are fraught with bank overdrafts and late fees and other issues that make people even more indebted than they have been before.
However, payday lenders have got a different point of view on these things. They say that the high rates of the loans come from their short term nature and that it is clear that such loans can’t be cheap in accordance to the rules of the market. However, problems arise when people renew loans and do it continually; this is where long lasting obligations come into play.
Payday lenders are in demand and due to the fact that credit unions as well as banks are unable to meet such short-term needs of borrowers who sometimes have to find small cash and fast; let alone the customers who are unable to apply for a bank loan due to their bad credit. The proponents of payday lending as a service say that total elimination of payday loans won’t be helpful to the low-income individuals, it will actually deprive them of the last financial resort.
Many people in financial industry agree that CFPB don’t need to be too hard on payday lenders. Or at the very least they should present a decent and available alternative to such service. At the present moment payday loans are highly in demand despite the fact that they are very highly priced; and if they are to be regulated out of existence, there should be some option that would fill in the niche instead. It is hard to image that banks will partake in this at the present moment.
One of the most interesting ideas that appeared in the process of payday loan discussion is to alternate the way employees are paid. If repayments are made each day, a great deal of cash will reach the workers faster than it I when the payment cycle is each month or a fortnight. Surely, this is a very alternative measure and not many employers will agree to it; however, this is one of the ideas that CFPB should take into consideration instead of making strict payday loan rules even stricter.
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