With millions of American still facing financial hardship due to the economic downturn, more people than ever before are turning to faxless payday loans to help ease their financial burden. Payday loans have been around for a number of years now, and the companies who offer them often target them at families with low incomes. In this article, we will be looking more closely at faxless payday loans, what they are, how easy it is to get one, whether they are a good idea and how to avoid taking one out in the first place.
Payday Loans A Guide
If you are unfamiliar with the term “payday loan”, it simply means a short-term loan that you are required to payback when you receive your next paycheck. Another way to look at a faxless payday loan is to think of it as part advancement on your wages, as the repayment period is usually determined by the date of your forthcoming paycheck.
Here are some of the basic requirements when applying for a payday loan
- The borrower is required to provide proof of their employment, and provide an up-to-date bank statement.
- The applicant is required to provide a postdated check for the total of the loan amount, and that will include fees and interest incurred on the loan.
- In states where postdated checks are no longer allowed, the borrower will be required to date the check for the date of when they receive the money. They may also have to sign a statement that confirms that the check will be kept by the lender until the date the loan is due to be repaid.
When the time comes to pay the loan back, the borrower simply visits the payday loan company to pay what they owe, however, if the borrower is unable to get to the store, the lender can then deposit the check that was signed at the point of application into their bank account. If the person who took out the loan is not in a position to pay back the full amount, they can often apply to have the payment date extended, although this may incur further charges. Failing to pay a payday loan could leave the borrower facing check fraud or even criminal charges.
Who Is Most Likely To Use A Payday Loan Lender?
It is one of life’s unfortunate facts, that the people most likely to make use of a payday loan are people who are on low incomes and have little disposable income. A recent survey commissioned by pewtrusts.org discovered that borrowers are usually in desperate need of funds, and they are often convinced that they can pay the loan back in full and on time, even though they may not be able to.
“Payday loans are marketed as an appealing short-term option, but that does not reflect reality. Paying them off in just two weeks is unaffordable for most borrowers, who become indebted long-term,” Nick Bourke, Pew’s expert on small-dollar loans, said in a statement. “The loans initially provide relief, but they become a hardship.”
The Pitfalls Of Fast And Easy Cash
The major problem attached to faxless payday loans is that they often come with high fees and interest rates. Because the loans being offered are short-term, no more than two or three weeks, the typical interest rate comes in at around 20 to 30 percent. This percentage rate would come in at around the 750 to 800% mark if the loan had an annual percentage rate (APR), and for many financial commentators, this is too high.
How Easy Is It To Get A Faxless Payday Loan?
The answer to that question is, unfortunately, very easy. Typically, payday loan companies target poorer neighborhoods, as they know that that is there best chance of obtaining new customers. This is because, not only are people going to be desperate for some short-term cash, they are also the kind of people who may have had previous credit problems. Because there are no credit checks, payday loans are often advertised as being the ideal loan for those people who have a poor credit history.
The Payday Loan Trap
As well as the high interest rates and charges on a payday loan, one additional problem that faces borrowers is something which has become known as the “payday loan trap.” This is when, in paying back the loan, the borrower uses up all of their disposable income from their paycheck, meaning that are back to a situation where they have little or no money. Their only solution is to take out yet another payday loan to see them through until they receive their next paycheck arrives, and so the cycle continues.
Alternatives To Faxless Payday Loans
The only realistic way in which to break the cycle of borrowing and debt is not to take out a payday loan in the first place. Most people who decide to take out a faxless payday loan, often state that there is simply no alternative, however, that is not entirely true, and even if you have a poor credit history you may be able to find cheaper alternatives.
What You Can Do To Avoid Payday Loans
- Sit down and make a budget plan. This means cutting out any unnecessary expenditure, setting aside money for groceries, household bills and fuel costs.
- One way of saving money is to only buy the things you need, when you need them, and this particularly applies to groceries. More often than not, we go grocery shopping and buy too much food; this food then ends up being thrown away because it has expired. This is like taking a handful of notes and throwing them into the trash. By simply buying what you need, you will be surprised by just how much money you do save.
- When you have managed to save some money, put that money into a savings account, so if any unexpected bills come in, you will have the money to cover them, rather than rushing out to get a faxless payday loan.
- Ask your employer for an advance on your wages. A lot of companies offer this service in an emergency, although it will come down to the individual company, and some might not, however, there is no harm in finding out.
- If you have items of value, such as jewelry and electronic items you no longer have a use for, you may want to try a pawn shop. With a pawn shop, you will get instant cash on your items, and the chance to buy them back by a certain date (with a small charge on top), and if you do not buy your items back, then the pawn shop simply keeps them and sells them on.
- Bad credit, credit cards, is another solution, and a good alternative to faxless payday loans. More banks and lenders are offering people with bad credit histories, the chance to repair their credit rating by offering credit cards for people with less than perfect credit reports. These credit cards usually start with a low credit limit, typically around the $300 to $400 mark, and if you stay within that limit, pay your monthly bill on time and do not miss a payment, they will often review your credit limit from time to time, and offer you an increase.
- Although not ideal, and for some people it is quite an awkward thing to do, but if an emergency financial situation arises, it may be worth asking friends or family for a short-term loan. Typically, friends and family will allow you to pay the loan back in installments and with no interest, however, you need to be able to pay them back, otherwise you risk alienating your closest friends and relatives, so this should be something that you think long and hard about.
So Is Taking Out A Payday Loan Ever A Good Idea?
The answer to that question is, no. Payday loans are increasingly coming under attack from financial experts and social commentators who see them as preying on the vulnerable and the needy. They have often been called “legal loan-sharking” such is their high interest rates, high fees, and the way in which they trap the borrower in a cycle of debt.
When looking into the pros and cons of a payday loan, it is easy to see that the cons far outweigh the pros. The only good thing from a borrower’s point of view is the ease at which they can obtain the loan, but this is a double-edged sword, and the easier it is to acquire the payday loan, the harder it is to pay it back.
To summarize, payday loans are only a good idea if you can afford to pay the money back, without having to use up all of your income from you next paycheck, otherwise you will be back to the start, and in need of more money. There are many alternatives to payday loans, which you should be able to avoid taking one out in the first place, and this is something that is advisable to all of those people who are struggling with their finances.