Payday loans can be a lifesaver if it’s truly used for an emergency – only you can decide what’s truly an emergency. Most times something comes up; we freak out and instead of thinking things through and finding other alternatives we quickly react and put ourselves in a worst position than we initially started out; hence the existence of payday loans and car title loans and every other high interest loans available to those with less than stellar credit.
To borrow a payday loan is simple; you typically pay $20 per $100 borrowed or more. The appeal is all you need is a job, proof of employment and a check with a future date stamped on it – easy, right? No hassle, and most importantly no credit check. I’d rather you avoid them completely but if you must please choose one that is with the Community Financial Services Association; an association that provides guidelines that protect the consumer.
The most negative thing about a payday loan are the interest rates/fees! It comes to about 400% interest on a loan! That’s absurd. But if you need your car fixed; furnace repaired, water heater replaced – it suddenly doesn’t seem that bad. The key thing to remember is not to borrow more than you need. The payday loan clerk is a salesman; just because he/she states you can borrow up to $1000 does not mean you should accept it. Borrow only what you need!!! And if they offer you the monthly payment plan don’t fall for it; remember their job is to sell so that THEY can make more money. Pay if off all at once and avoid the pitfall of the monthly payments that make them more money and cause a financial strain on your budget.
So; what if you ignored everything that I’ve just said and borrow more than you can pay back by the next pay period? Well if they’re a member with the CFSA, all you need to do is tell them you can’t make the payment by the due date. As a member of the CFSA, they’ll need to stop all collection activity and give you 4 additional pay periods to pay back the loan in full. Oh, and they can’t charge you any additional fees during this period either. This must be done before the due date; or at least before close of business on the day before the loan is due; preferably in person; and it can only be done once on the same loan. It’s called an Extended Payment Plan. If they deny you or state they don’t offer this;
Now I must admit the collection activity from payday loan companies are THE WORST! They call your job; threaten automatic wage garnishments, threaten to sue you or file a police report for bank fraud to send you to jail (based on the post-dated check you wrote them); the list goes on and on – and its illegal. State laws govern the collection activities of original creditors; and fortunately most state laws closely follow the laws of the Fair Debt Collection Practices Act so all you need to do is look up your state’s laws on payday loans collection activities and rules. The list is usually found on your state’s Attorney General’s website; your state’s Consumer Affairs website will have some valuable information as well.