Payday loans in California
Payday loans are an easy, but cost-effective way of getting fast money. This article is about the advantages and disadvantages of payday loans.
How difficult is it to meet the needs of our family? The monthly house rent or mortgage installment, insurance premium, children education fees, the car gas, traveling cost, food cost….the list is endless. And add to these monthly payments those occasional spendings like buying Christmas gifts or the medical bill. How often do we feel that our pay virtually disappears from our account? And how hard is it to make ends meet in those last few days before we get our pay check?
If you face above mentioned problems, then Payday loans, though a high cost one, is a solution worth trying. A payday loan as the name suggests is related to the day you receive your pay. Usually, people feel need for money for a few days before they receive their next salary. This might be purely due to poor financial planning, overspending or some unforeseen expense. They require borrowing money for a few days. Payday loan lenders come to their rescue.
Payday Loan lenders
Payday loan lending process is very simple. The lenders are often individuals or small companies. These lenders give money in cash or check to an individual. In return, the individual gives a post dated check. The check amount includes the principal plus an additional amount for the service provided by the lender. On the decided day, the individual has to return the borrowed money and the additional charge. Otherwise, the lender en-cashes the check. Alternatively, the borrower can extend the loan too. In this case, he/she will give a new post dated check. This arrangement is called as loan rollover. The borrower can return a part of the principal and charges and extend the remaining. In this process, instead of a post dated check, the borrower can give a direct debit authorization whereby the lender can directly take money from the borrower’s bank account.
Why are Payday loans infamous?
Over the years Payday loans have become infamous due to a variety of reasons. Firstly, the additional charge which the lender charges the borrower is pretty high. When calculated in terms of interest, these charges translate into astronomical annual interest rates as high as even 50%. Such a high interest rate is considered exploitation. Moreover, the borrower doesn’t always understand this. This problem attains higher proportion due to the rollover provisions. People, often due to sheer ignorance and sometimes due to the laziness, tend to use those payday loans frequently. Also they keep rolling over the loan a number of times. They get habitual and eventually fall in a debt trap. Read this article about payday loans for a critical point of view.
Secondly, the lending practice followed by lenders is suspicious. Often these lenders work on behest of reputed financial institutions. These institutions cannot directly play the role of lender due to government laws. Hence Payday loans often fall out of favor of the government and legal agencies.
Requirements to get a Payday loan
Traditionally getting a loan - personal, home, car or any other - from a bank requires a lot of documentation. You will have to qualify and meet many criteria to get a loan. However, Payday loans are perhaps the easiest to get. All you require is a proof of source of income and a checking account. So with just a couple of pay stubs and a bank statement, you can get a Payday loan. Payday loans are also easy to understand. They don’t involve complex calculations or difficult to understand terms like pre EMI and Closing. They just have two terms; principal and flat fee.
The Changing trends
With all the controversy surrounding the payday lenders, things are changing and processes are becoming more transparent. The lenders are being asked to reduce the flat fees thus avoiding exploitation of the borrowers. Some lenders are now asking borrowers to keep a time deposit with them. They would now lend against this deposit and charge relatively lower fees. Though, the higher the deposit the lending agency asks from the borrower, the more would the borrower shy away from the agency.
However, gradually things are getting better for the borrowers. Whatever may be the future events, Payday loans are here to stay. The government offers some useful information which you should consider before getting a payday loan.
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