CRRRRUNNNCHHHH!
(Did you hear that loud grinding noise? That was the sound of your car transmission dying on you.)
So now what do you do? You're strapped for cash and a half dozen creditors are snarling at your $200 checking account!
But you absolutely must get your car fixed. You need it to get to work. No car, no job.
So, to come up with $1000 fast for the repair, you take out an "easy payday loan.".
Easy payday loans, as they're often called in advertisements (also "quick payday loans" or "faxless payday loans") can be a source of immediate cash for just about anyone who's employed, but they come with a hefty price tag (high interest rate). What's more, they carry a number of serious potential costs you should be aware of, as I outline below...
Easy Payday Loans - Basic Points to Consider Before You Take Out the Loan
Here are some basic common-sense points to consider before taking the plunge and signing for a payday loan (or any other type of unsecured personal loan) --
1. Never borrow money unless you have a sound reason - i.e., "taking a weekend trip to Cancun" is not a sound reason -- and if you do have a sound reason, never borrow more than you need.
2. Don't think you have to jump at the first loan offer. Compare terms from two or three lenders at least. And in making the comparison, don't just consider the monthly payments - look at the total cost of the loan, including "invisible" charges like credit insurance and other fees. Read the small print before you sign. You'd be surprised how many loan companies out there derive a big source of their income from the small print in their loan contracts!
3. Always try your credit union (if you have one) before even considering an easy payday loan.
4. Never pledge valuable assets when taking out a small loan. Never use credit cards to get emergency cash - credit card interest rates are phenomenal and you can soon find yourself working mainly to pay off your credit card debts!
5. Be aware that interest paid on payday loans is not tax deductible.
Subprime Loan Issues
If your credit score (i.e., FICO score) is 650 or below you are - in the friendly terminology of loan companies - "subprime." And if you've had a bankruptcy within the past five years or a foreclosure within the past 24 months, you're also likely to be classified as subprime -- in other words, "high risk."
Provided you're employed you can still find emergency cash; however expect to pay a somewhat steeper interest rate for it.
And you should also keep in mind the following considerations if you find you've been labeled a subprime borrower --
1. Avoid allowing several lenders to access your credit report at the same time - several inquiries on your credit report in a short period can damage your credit score even more.
2. Stay away from unsecured personal loans which involve any sort of "fancy" terms such as balloon payments or adjustable rates.
3. As with all borrowers - but especially in the case of subprime borrowers - do not pledge personal assets when making a loan. And, again, read the small print. Some unscrupulous lenders try to take advantage of the subprime borrower by inserting unusually strict terms into the loan agreement. You can count on being held to whatever is in the contract, so exercise caution. Don't necessarily take the first loan offer.
Be aware that easy payday loans are seldom a good deal financially for the lender. But emergencies do happen and a payday loan can be a lifesaver - as long as you understand what you're getting (a high-interest loan) and make up your mind to pay the money back as fast as possible!
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