In this rapidly deteriorating economic climate, emergency cash loans and payday loans are becoming increasingly popular. The problem with these is that more and more people that have never required a short term unsecured loan in the past are finding a need to obtain one for that ‘rainy day’ for which they have no longer been able to save up.
Many people are spending their savings, and the term ‘life savings’ is now a bit of a joke. Those that can afford a life savings scheme don’t need it, and those that need it can’t afford it. Of course I don’t mean that literally, because many people are saving and need their savings, but nevertheless the sentiment is pretty accurate. Saving is getting harder, and when that unexpected expense comes along then those that not too many years ago would have had something put by to cover it no longer can.
Unless you are dealing with a company with few morals, you will likely be offered no more than up to $1,000 for your first loan. Some companies restrict that to $600 for first time customers. The reason for that is that the loan is not secured, and even though legal action would sequester the cash back from your income, most loan companies would rather not do so for a large amount, and it is easier and less expensive to recover a small amount than a large amount.
The reason for taking such a loan has to be compelling. If you can borrow from a family member or good friend then do so because it will ultimately be less expensive for you (unless they charge you a high rate of interest!). It is not economical to use an emergency loan to pay another loan, although if you are in danger of defaulting on accredit card payment you might think the extra expense worth maintaining your good credit record: no price can be put on that.
Interest rates vary, but they are not termed that – they are generally referred to as the fee. That can be anything the lender wants but the average is around 25% for up to a month. So if you get paid on the last day of the month and borrow $400 on, say, the 10th, you will pay back $500 the following payday. And if you fail to do so, because you can’t afford it, then you can ‘roll over’ the loan and repay it the following payday with another fee, so you pay back $600.
There are several different procedures, and not all lenders work the same way. Here are some of the variables:
1. Credit checks: some lenders will carry out a credit check and some will not. You might get a lower fee if you have a good credit record, but a bad credit record will not stop you getting the emergency cash loan. Because:
2. Security: the loan might be legally classed as unsecured, but you have to be in employment to get one, and also have a checking account, or current account as it is called in the UK. The security is that the lender has you sign a direct debit form so that the payment is taken from your bank account on payday.
Now, they have no means of knowing when your payday is, but if you fail to pay they can have an arrestment order on your wages, so that your next paycheck comes with the repayment taken off. Your employer is bound by law to adhere to the arrestment order. That can be embarrassing, which is why you should stick to the agreement.
3. Arrangement: The way that my two loans were arranged went as so with two different loan companies:
a) I applied using an online form, providing the usual personal details, plus my monthly net income, my pay date, and the telephone number of the company – not the name, just the number.
b) I filled in an online direct debit mandate providing my bank details and account number.
c) The lender called the company and asked for me. When they were put through I was asked my date of birth and monthly salary. That was how they checked that I worked for the company, and me knowing the details indicated that it was I that filled in the form.
d) The cash was put into my bank account.
That was it – with both companies. Now I know that some ask for you to fax your bank statements and payslips, but you can avoid that if you deal with the companies on my website. There are the easy ways and the hard ways. In fact one of the two companies I dealt with had the cash in bank within 2 hours of me applying by means of a CHAPS payment – that type of payment usually costs a fee, but it came free. Well, you know what I mean. I didn’t pay for it in advance let’s say, but it was certainly included in the fee!