payday loan

Payday loan debate in Arizona

Payday loan debate in ArizonaPayday loans are really getting the heat these days, aren’t they? I ran across a news article online which talked about a debate in an Arizona church about payday loans. On one side, there was Timothy S. Janouseks, the South Arizona coordinator for Arizona for Financial Reform. On the other side, there was Rep. Timothy Janousek. The former was lobbying for changes in the payday loan industry while the latter was seeking to classify payday loan lending as a felony. Talk about two ends of the spectrum!

I won’t even bother dwelling much on MCSL statements as I think that they are just way too extreme. Her position on the payday loans for people with no credit history issue does not really solve any problem or need, in my point of view. On the other hand, Timothy presented some interesting points. These are:

– Cut the fee by 15 percent per two-week loan from 17.65 percent to 15 percent.
– Eliminate rolling over principal balances to extend loans.
– Create a free repayment plan for those who can’t pay their loans when they’re due.
– Implement a statewide database of people on repayment plans to prevent them from taking out other payday loans to cover the first loan.

Let’s look at each point one by one. The figures in the first point may differ here in the USA as Timothy’s situation is quite different in the US. The idea seems to be a good one, though. Lowering the allowed fee could be of more help to those in need of urgent cash. Of course, this has to be looked into in more detail as the feasibility of the fee cut could jeopardise the payday loan industry. But if a fee cut can be done and keep payday loan lenders in business, then I am all for it. It is definitely better than denouncing payday loans completely!

payday loan lenderThe second point is another matter that should be considered in more detail. If the principal balances are not rolled over, would this be feasible for payday loan lenders? If so, then I am all for it – it would certainly make for easier borrowing and repayment. This also means that more people will be able to avail of more payday loans.

I think that to some extent, the third point is already being practiced by some payday loan lenders. Perhaps better repayment plans could be considered instead. Another option would be to have standards as to the structure of repayment plans.

For the last point, I am sure that this will get mixed reactions. For one, many people like the idea of being able to take out multiple payday loans. Then again, this is one of the biggest reasons that people end up being in huge debt because of payday loans. If multiple borrowing can be regulated – not totally eliminated – then I suppose it would be a good thing in the end.

What are your thoughts on this?…

loan fees

Evaluating payday loan fees

evaluating payday loan feesMost people have heard or used payday loans. Have you ever stopped and really considered what the interest rates are that can be associated with a payday loan? Most people never really stop to consider it, instead they merely think about the fees that can be charged which tends to be roughly $15 for each $100 that you borrow. On its own, you are looking at an interest rate of approximately 391%, which seems extremely excessive, but how does this really compare to paying a bill late if there is a late fee involved? The biggest question that people have is how much money are they really saving by obtaining a payday advance to pay a bill. The ultimate answer will vary of course depending upon your specific bills and the fees that you are charged but we are going to take a moment to just look at some basic scenarios for a moment. This can help you to gather a clear indication of just how much a payday loan really costs, and what type of money you are either wasting or saving.

One of the biggest reasons that people obtain a payday advance is so that they can cover a potential bounced check fee at their bank. But if you stop and consider how much the bounced check charges can add up to, you are looking at an extremely heavy interest rate as well. For example, if you consider that your bank will charge you a $30 fee, in addition to a $20 fee from the merchant this is a combined cost of $50 just for a single check. Assume that the check was for a mere $100. This adds up to a total of $150, however if you obtained a payday loan for $100, you would be repaying only $115. The interest rates for the NSF fees are more than 1,251%! Talk about a huge savings by obtaining a payday loan, but if you just initially look at the $15 charge that is standard for the $100 payday loan, you can see how the number would appear huge.

Another example is a credit card bill. If you owe $100 on your credit card and your late payment fee is $30 for paying it late you are looking at owing $130 for your credit card bill for a single month. This is in comparison to the $115 that you would owe for the cash advance. However, compared to the 391% interest rate for the cash advance you are looking at more than 678% interest to the credit card company. Once again, this is a huge difference that you might not even realize initially, but after just a single late payment fee to the credit card company, you can see how this can really throw your budget off. Let us assume for a moment that the credit card company adding the $30 late payment fee threw your account over the limit, you are then looking at another $30 over the limit fee, plus possibly looking at a higher interest rate because you have gotten behind.

For a last example, let us look at a utility bill. For example, once again the bill is $100, and you are not able to pay the bill. Let us assume that your power is turned off. In my area you would be required to pay an additional $200 deposit, plus a $75 reconnect fee! All of this is tacked onto your original $100 power bill, which now has the huge sum of $375, of which only $100 is actually credited to your account. As you can see, the fees that you can incur in lieu of using a payday loan are astronomical which makes the high fees of a payday loan look quite mild.…

true costs

True costs of payday loans

You have looked and decided that you are best off using a payday loan you think, but do you really know how much the loan will cost you? It is extremely important for consumers to have a very firm grasp of the entire picture so that you can see how much it will really cost you. We are going to use for example a payday loan of $500. This is an amount that is around the average 2-week paycheck for many consumers and is therefore a reasonable number to use. We are going to assume that we pay off the loan over the course of one year, which for a traditional loan would be only 12 months.

true costs of payday loansUnder these circumstances, you are looking at paying 26 payments that are made every 2 weeks. This is gathered by taking the 52 weeks in a year and dividing it in half, which we then arrive at the number 26. From here, let us assume that you are paying an interest rate of $15 for each $100 that you borrowed. While all of these numbers may seem overwhelming, you are looking at a gigantic total of $1,950 just in interest alone at the end of the loan term. This means the total amount you will have paid at the end of a year is $2,450 or an incredible 390% interest rate.

Now if you decided that you were only going to pay on this loan for a period of 9 months you would be instead looking at a total interest charge of $1,350. Which while this brings the entire cost of the loan to a whopping $1,850 it is substantially better than the $2,450 that it would cost to hold the loan for an entire year. However, there is still yet room to improve and turn this even better in your favor.

Another example would be the same loan for a period of 6 months only. This still involves the original numbers of $500 for the loan and repaying $15 for each $100 that you borrowed. Now the interest charges add up to $900 with the total loan costing $1,400. As you can see the numbers are substantially lower, however it is still a lot of wasted money to continue renewing the exact same loan. If you were to only renew the loan for 3 months you would be looking at a total cost of $950 with interest alone accounting for $450 which is almost the same amount as the loan originally!

For a final look at this the same $500 payday advance carried for only a single term would only cost $575 with the interest only accounting for $75 of the costs. This is a much more preferred payment schedule and will allow you to free up your money for other bills and needs that you have. However, it is very easy to see how a consumer can become caught up in payday loans. Yet, if you take the time to really study your finances and compare all of the costs you can proceed into a cash advance with the plan and aim to repay it immediately which can allow you to get the cash you need quickly, without the struggles of paying astonishing amounts overall for the loan.…

payday loan law

Finding payday loan laws

Finding payday loan lawsThere are numerous times in your financial career that you may need to know information about specific laws and how they impact you and your finances. For example, in regards to payday advances there are numerous laws that are up for interpretation and plenty of times when they can be very confusing when you are trying to determine what your rights and responsibilities really are. This means that it is very urgent to be sure you are well aware of how things really work in terms of legal requirements.

One of the biggest concerns that people have is ensuring that they are not treated unfairly. For example, in a world that is overflowing with poorly run collection agencies it is no wonder why so many consumers are a bit leery of getting involved into another debt. However, there are plenty of people who are looking for ways to protect themselves. This means it is very important to know exactly what your responsibilities are. However, it can be very difficult to find this information unless you know exactly where to look.

One of the best places to learn about your rights in regards to a payday advance is by looking at the website for your particular state. While this will not always give you a perfectly clear picture of how things are going, it can certainly help you to determine which businesses in your area actually have your best interests at heart. By searching around on your state’s website you can gather accurately just exactly how your state regulates the payday loan industry and ensure that you are protected. However, there are other sources of this same information as well and they can include various other sources.

There are several federally sponsored websites that provide information as well. These websites will typically end in a domain name .gov and will almost always break the information down based upon individual states, which is the most accurate way to obtain the information. For consumers who are curious as to whether a payday loan lender is licensed in their state it is typically best to contact the state in which they live to ask. Another option is to contact the lender themselves and inquire whether they are licensed.

While it may seem quite trivial to know whether a payday lender is licensed it is a wise decision to know this information. After all, knowing this information it is possible to make wise and informed decisions in regards to exactly how you handle your finances, as well as the advance itself. Not knowing the information about the payday lender that you are working with could allow you to make some very costly mistakes, which can be extremely difficult to recover from.

Take the time to learn and study up on your rights. Just as you would not obtain a mortgage without finding out about your rights and responsibilities you should not obtain a payday advance without finding out your rights either. This is important information that all consumers should be very much aware of before ever going to apply for a payday loan. After all, protecting yourself from an unsavory lender involves knowing about all of your rights and knowing how to protect yourself.…