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A Look At Payday Loans(1)

A Look At Payday Loans

Sometimes referred to as a paycheck advance, payday loans are short-term loans that are designed to provide the borrower with immediate cash in exchange for a promise to repay the loan on your next payday. Typically, these types of loans do not require a credit check and are, therefore, ideal for many who have little or poor credit. What is more important, however, is a steady job with a guaranteed paycheck. As such, payday loans are not usually approved for individuals who are self-employed or who have unpredictable/sporadic work schedules.

If you are approved for a payday loan, you will most likely be given cash in exchange for your postdated check that reflects the amount of the original loan plus interest. Typically, the lender will cash the check on the day of the applicant’s next payday unless other arrangements are made. An example would be if the payday lender were to offer the borrower an opportunity to refinance the loan instead of having their check cashed. For an additional fee and interest, many payday lenders will grant this option for their customers.

While some national corporations offer payday loans, the majority of lenders are locally-owned companies. In addition to simply running short on cash, there are many reasons why an individual may need to request payday loans. Among them, unexpected car or home repairs and doctor visits. Quite often, it is difficult to survive from one paycheck to the next and, when life happens, many find that payday loans are their only answer for quick cash. After being granted a payday loan, the money can be used to help pay for groceries, gasoline, electricity or other utilities, insurance or other necessities.

As mentioned previously, the process of requesting payday loans is quite simple. All that is needed is copies of past paychecks or stubs, proof of current employment, wages and the applicant’s length of employment. All of this information is important in determining the probability of an individual being able to repay the loan as agreed. Because a credit check is not commonly performed, verification of employment is the best verifiable resource for payday lenders. In addition to the aforementioned documents, most payday lenders require some form of photo identification and a checking account with one check made payable to the payday lender.

If at all possible, individuals who accept payday loans are urged to repay them in full as soon as possible. Otherwise, fees and additional interest will continue to accrue until the balance due has increased significantly beyond the original loan amount.

Loan Sharks Are Illegal Money Lenders Know The Catches of Using Their Money

Loan Sharks Are Illegal Money Lenders-Know The Catches of Using Their Money

Banks and legitimate finance institutes will normally check the loan applicants' credit history and evaluate their past repayment performance before they approve their loan application. This makes loan applicants with bad credit scores hard to obtain a loan from these legitimate finance organizations. Many bad debtors who urgently need money will turn their head to borrow the money from illegal money lender. These illegal money lenders normally lend out their money with extremely high interest rates and often backed by blackmail or threats of violence. Hence, you are risking yourself if you borrow the money from a loan shark.

What Is A Loan Shark?

By definition, a loan shark is a person or body that offers illegal unsecured loans at high interest rate to individuals, often backed by blackmail or threats of violence. A loan shark is an unlicensed money lender who provides credit to those who are unable to obtain credit from a legitimate financial organization.

What Are The Catches?

Loan sharks which are normally unlicensed money lenders will offer loan to those who need cash. However, there is always a major catch - how much has to be paid back. The terms on offer will usually be very poor. There are many cases of people borrowing a small sum of money and paying double or triple that original sum in interest.

Many loan sharks count their loan's interest rates based on the principle amount and the interest rate may goes as high as 12% per month (144% APR). For example, if you borrow $5000 from a loan shark, you need to pay $600 every month just for the interest. You will never payoff your loan amount if you just pay $600 a month because the interest rate is counted based on principal amount, the $600 you pay is the interest.

The power of interest is work well in your savings, it will generate more cash in your saving account. But if the poser of interest is used on a loan, especially on the loan from a loan shark, it will be very scary as it will generate more and more debts and it make you harder and harder to repay your debts. Take for the above example, if your borrow $5000 from a loan shark and you can only pay $500 each month. Your debts will climb up about $18,000 in 2 years and you have paid $12,000 of interest. Your debts will continue to increase in very scary trend if you continue to pay only $500 to the loan shark; your debts will hit $50,000 in another year (the third year) for your $5000 loan and with $18,000 interest paid.

Many loan shark's customers run away and hiding themselves from loan sharks after finding themselves unable to bear the repayment. And loan sharks will take actions to chase back their money, often they will send out blackmail letter, put scary items at their borrower's home, make scary phone calls and have their "staffs" waiting for client at client's home. In this process, violence action may involve and in the worst case may get the borrower or the borrower's family hurts.

In Summary

It is illegal to borrow money from a loan shark and if you get a loan from them, you are putting yourself at risk of violence and making your debt grows like a mushroom in short period of time. You should consider the possibilities for getting the cash, there are loan programs for people with bad credit scores, check it out with a finance consultant close by to get more information on your options.