Payday Loan Times

Dr. Marvin Copes is an Education/Community Service Volunteer for AARP Alabama in Maylene. He recently wrote about the instant payday loan world, how to avoid applying for these resources and where to turn if you needed them …

Let's start with ways to rid yourself of debt: Contact your creditors to see if they will give you more time to pay your bills. If they agree, you can pay these balances when funds are actually available. Maybe borrow from a friend or family member.

If a payday advance is unavoidable, however, be sure to shop around. Although payday loans may be the only option for certain borrowers with poor credit, you may be able to find a bank or credit union that will approve a small loan with a reasonable interest rate. Compare both the APR and the dollar amount of the finance charge.

More financial advice: Consider getting overdraft protection on your bank account. You will avoid returned check fees and have a cushion in financial emergencies. If you own a credit card, try taking a small cash advance out on it.

If you find you are just a little short of cash each month or can’t pay unexpected bills, take a hard look at your income and expenses. Is there any way that you can develop a modest savings plan? If you track where you spend your money, you may find ways to save. Are there some purchases you don’t have to make? Think about it.

With just $300 in a savings account, you may be able to handle a financial emergency without going to a payday loan company. If you can do this, you can avoid high payday loan fees AND earn interest on your money until you need it.

Finally, if you need help preparing a budget, you can get it from a nonprofit credit-counseling agency or cooperative extension agent in your area. The overall idea is to look around before just settling on a cheap payday loan - and then being smart about this decision once you do have to make it.

How do consumers know it’s summer, aside from those scorching temperatures? Try the numerous payday loan, mortgage and other loan offers they’re besieged by. Borrowers are constantly encouraged to charge a vacation to a credit card or take out a cash advance for a new boat.

Of course, these can have detrimental side effects; namely, an abundance of debt. This has become more true than ever thanks to the doubling of minimum credit card payments, the new bankruptcy reform law that took effect last fall and the extreme interest rates charged by most online payday advance lenders.

With this in mind, let’s go over a few tips for controlling those balances:

1. A budget knows no season: Just because the boss is in Hawaii doesn’t mean your budget is on vacation. Post your budget somewhere visible, like the fridge door, so summer can’t burn it out of your mind.

2. Stay old-fashioned: How did you spend summer days and nights as a child? Revisit old favorites: star-gazing, basketball in the driveway, frozen fruit pops, a cookout with friends, a trip to the local pool. You don’t need a payday loan online for these activities.

3. Take it easy on vacation: Try a camping vacation or a road trip. One study found that a family of four can take a weeklong RV trip for $483, compared to $1,169 for a car trip (staying in motels) or a painful $2,918 for a vacation by plane. For a getaway on the (dirt) cheap, pitch a tent in your backyard - and borrow your own indoor plumbing.

4. Think cold: Think “Christmas in July” and plan now for holiday purchases. Make sure you have a budget in place for seasonal gifts. Then, take advantage of summer sales to get great deals. This will help you not become one of the millions that turns to faxless payday loans for last-second shopping.

Yikes. Total U.S. consumer debt stands at over $2 trillion. Not even thinking about any balances from payday loan online use, more than 44 million American households carrying average credit card balances of $8,025.

It's clear, therefore, that many Americans need more astute financial education. Andrew Housser, co-CEO of Freedom Financial Network, LLC, has it for you. He breaks it down by the ABCs:

• A = Add it up. Begin by understanding what you have. Add up all monthly net household income (the amount left after taxes and other paycheck deductions such as health insurance and 401(k) contributions) to determine how much you have to spend.

Then categorize your ongoing monthly expenses into fixed expenses (like rent, mortgage or personal loan payments), variable expenses that are "must-buys" (food, gas, medicine), savings, and finally, spending money (for unexpected expenses and entertainment). Add those up to understand your cost of living.

Subtract expenses from income. If that number (your bottom-line cash flow) is negative or does not help you achieve your short- and long-term financial goals, find a way to either increase your income or reduce your expenses.

• B = Budget, budget, budget. If you've followed "A," your budget is already halfway done! At the beginning of the month, map out how you will spend your money in the coming month.

Don't forget to pay yourself first. Be sure to add a category for savings, and guard it fiercely.

• C = Cash won't crash. If you're among the Americans carrying an average of 16.7 credit cards, put away the plastic. Cash out your spending money in cold, hard bills, and don't touch the plastic for discretionary expenses such as clothing, movies, coffee, dining out or happy hour.

Most importantly, never charge more than you pay off at the end of each month. This is the reason why savings account payday loans are often dangerous; individuals don't realize how much they'll owe after a few weeks.

A recent article in The Daily World deals with these inquiries.

As gas prices soar and families look to take expensive vacations, we're entering a time of year where people often find finances especially tight. Consequently, the use of faxless payday loans is often considered. They seem so easy!

Through the internet, telephone, mail and television, we get bombarded with offers of “fast cash regardless of credit.” These pitches are usually from lenders whose tactics could be considered “predatory.”

To help you avoid these traps, the publication asked its housing counselors, Royce Travis and Julie Galligan, to answer some questions on predatory payday advance lending.

Q: I’m often out of money before the end of the month, so I go to one of those check-cashing places. Now I go there at least once a month, but it seems like I just keep getting further behind. Help!

A: Using “payday loan” or “check cashing” companies can lead to dependency. After paying back the initial loan, you find yourself broke and so you take out another loan to feed the family and pay bills.

Though the "quick cash” seems harmless (pay $56 for borrowing $200) the following information might make you think: Calculated on an annual basis, the interest rate you paid on the $56 fee is 730 percent!

If you find yourself frequently needing cash between paydays, it’s time to establish a budget to help maximize the use of your funds so payday loans are not necessary.

(Read on …)

It happens all the time.

You, the consumer, think you are making a move that will help get a handle on your escalating debt. The next thing you know, you are in a damaging payday loan trap. It's hanging over your head. You want out. But what to do? Are there debt consolidation places that can help get you out of this cycle? What is the best course of action?

According to Bankrate.com advisor Steve Bucci, this is a cycle that can be very difficult to break — but it can and must be done.

If you are living paycheck to paycheck, as so many American families are, and are without savings or conventional credit, handling unexpected expenses can be a major problem. And payday loans can seem like a godsend at a time like this.

The main reason is that the money from the first loan is an advance against your next paycheck. That leaves you with less income than you are used to and, for most people, puts you behind on your usual expenses. Therefore, to catch up so that you do not miss any bills due to your faxless payday loan, you go back and apply for another, or renew your current one.

One of the many problems with these types of loans is that until you break the cycle of borrowing, you never catch up.

(Read on …)

Let's take a look at the circumstances surrounding this consumer: Through medical expenses and a move across the country, she and her husband have over $25,000 in credit card debt.  

As the couple's credit score has dropped, interest rates have risen and the duo can scarcely afford minimum monthly payments. Is applying for a payday loan the answer or are there other alternaitves? 

First, you can back to the credit counseling agency initially contacted and tell it it want a plan to get out of debt. This may or may not be a formal debt management plan in which interest rates and fees are sometimes reduced, but it should at least be an action plan with specific steps for you to follow, one that doesn't yet require any faxless payday loans.

If a debt management plan is not for you, call your creditors. Explain about the medical emergency and ask for a hardship plan or an interest rate reduction. Many creditors will respond favorably to a well-documented history that shows events beyond your control caused your situation. Be sure you have a dollar amount you can afford to pay each creditor before you call.

Another option is to contact an attorney. First, ask that the attorney write and propose a repayment plan you can afford. Often, attorneys' letters get good responses. Then, if that fails, ask about a bankruptcy. The new rules make it more difficult, but not impossible, for you to get relief this way.

Finally, look into the possibility of a no fax payday loan. It can be convenient and affordable if you understand all aspects of it.

Student loan debt is a problem outside the U.S., too. In Canada, recent graduates are being urged to spend their new paychecks wisely. Set a budget, states a recent Toronto Sun article.

New grads often make commitments based on their gross annual salary and are shocked when they see their take-home pay. As a result, they're forced to consider supposed fiscal saviors such as payday loans online.

"Creating a budget is a tool, not a financial handcuff," says Debby Fowles of about.com financial planning guide.

Begin by taking a hard look at your discretionary spending, such as cellphone packages and expensive jeans, along with non-discretionary expenses such as food, rent and transit pass, advises Alexis Mantell of RBC Royal Bank in Toronto. Don't be tempted by a quick payday loan fix if problems arise.

"Financial planning should revolve around cash flow," Mantell says. "Determine a monthly student debt re-payment amount that will allow you to live comfortably while making a significant dent in your debt load. Synchronize your loan payment date with payday to ensure it always gets paid off the top."

Look for ways to reduce your cost of borrowing. If you're carrying a credit card balance each month, or you're short of cash and have overdraft protection on your bank account, consolidate all debt into the vehicle with the lowest rate of interest - likely a line of credit. Only consider a quick cash loan if you must. Set a goal.

"Determine a time line for completion of repayment. Set aside a small fund to reward yourself for meeting that milestone," Mantell says.

Your payment period will depend on the amount of debt outstanding and how it's negotiated. It will also have a lot to do with the type of job you possess and your living situation. A single working professional can lower balances more quickly than one who is married.

Moreover, those having difficulty making payments may be eligible for interest relief. If your application is approved, the government will pay the interest on your student loan for a period of time, possibly as long as 36 months, Mantel says. This would be another cash advance alternative.

 
Twice a month, the Northeastern Indiana Better Business Bureau pens a consumer advice column. This week's edition focused on a payday loan alternative: credit counseling agencies.

As gas prices continue to climb, groceries rise and interest rates creep up, some people are feeling the squeeze. They are probably considering the use of same day payday loans. The BBB, however, advises consumers who are sinking into debt to take proactive action by working with an experienced credit counseling organization instead.

Here's how it works: A trained and certified credit counselor will analyze your income, expenses and debts; discuss your current situation; and make recommendations to address your financial problems. It's easy to spend some time online researching your options and selecting a reputable agency.

Your goal should be to find a credit counseling agency that has satisfied clients, offers personalized service from trained counselors, can educate you how to make appropriate financial choices and will provide you with tools to achieve financial security. You may, of course, also ask these experts about their views on personal loans.

Check the agency out with the Better Business Bureau (www.bbb.org), state attorney general and your local consumer protection agency. Any reputable credit counseling agency should send you free information about its services without requiring you to provide any details about your situation. If not, consider that a red flag and go elsewhere for help.

Corporate environments, sprawling apartments, financial freedom - such are the dreams of many college students as soon as that final exam is passed in. They hope to ditch their graduation gowns for a life on their own.

Unfortunately, rising student loan payments make this difficult. Recent studies show that the price of education is higher than ever - could the use of a payday loan be the answer?

For the 2005-06 school year, the average cost of attending a four-year public school was $5,491, according to the College Board. Meanwhile, full-time enrollment in a four-year private university set students cost $21,235. Consequently, the U.S. Department of Education's National Center for Education Statistics reported that an estimated 65 percent of the students who graduated in the 2003-04 school year had student loans.

That's A LOT. The result? Graduates are soon saddled with debt before even receiving their first paycheck. For this reason, many turn to online payday loans.

(Read on …)

While most American households do well when it comes to money management, lower-income families — which generally have less of a financial cushion to deal with unexpected problems — face many challenges, Federal Reserve Chairman Ben Bernanke said Tuesday.

Bernanke observed that families are coping with higher borrowing costs and lofty energy prices in these times.

In addition, U.S. consumers must deal with an array of increasingly complex financial products that seem bewildering when it comes to making smart financial decisions.

"U.S. households overall have been managing their personal finances well. On average, consumer debt burdens appear to be at manageable levels and delinquency rates on personal loans and home loans have been low," Bernanke noted.

The lower-income bracket Bernanke speaks of is the target of payday loan firms, critics of the industry are quick to point out.

While most U.S. households are juggling their financial obligations well, families with lower incomes face greater difficulties with credit card debt, medical bills and more.

"These families generally have less of a cushion to absorb unanticipated expenses or to deal with adverse circumstances, such as the loss of employment or a serious health problem," Bernanke said.

Low income families are significantly less likely to have a checking or savings accounts. Families on the low end of the income spectrum are also were less able than others to manage their debts.

Financial education, encouraging savings and investment, community economic development initiatives and other things can help families of modest means build assets and improve their economic well-being, rather than relying on a payday advance service and other short-term, quick-fix methods of getting by.

Bernanke urged the promotion of financial literacy in schools.

"I served six years on the local school board and one of the issues I was always pressing was to get more economics into the curriculum, including financial literacy. It was always a push," Bernanke recalled.