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(185)Payday Loans: Personal Finance Savior Or Disaster?

 


Summary: You need a small amount of financial help fast, but you heard payday loans can be expensive and dangerous. What now? Find out how to avoid the dangers and reap the benefits of payday loans.

Payday loans may be right for you if you need some money for a short time and have no other option. Car repairs, medical emergencies and other unexpected expenses can really strain your finances. Some weeks last longer than your wages do. So you simply borrow enough to tide you over until your next payday.

There are two kinds of payday loans:

1) online payday loans

2) in-person cash advances.

Both kinds of payday loans are convenient, quick, private and easy.

• Convenient: You can apply for an online payday loan using your computer. You don’t have to deal personally with a loan officer when you apply for or request an extension for your payday online loan.

• Quick: The online payday loan takes only a short time to complete and usually doesn’t require any other documentation. Web payday loans are approved in minutes--virtually “guaranteed loan approval.” The cash could be in your bank account within a day.

• Private: You apply for an online payday loan at home. No bumping into nosy neighbors while waiting in line at the bank!

• Easy: There are few online payday loan application requirements. The loan amounts are smaller than conventional bank loans so the paperwork is less. Generally, you just need to be at least 18 years old, have a job (so you have a payday) and earn at least $1000 a month.

Note: a payday cash advance loan is a little different from the online loan. All you do is give the lender a post-dated check or some personal information like a credit card number and you get your cash advance on the spot. When you repay the loan on payday, you get your check back. Of course, it lacks the convenience and privacy of applying online.

Avoiding Payday Loan Dangers

So, what about your friends’ warnings? Yes, payday loans can be quite expensive. Interest rates are high--sometimes as high as 700% a year! You may also be charged other fees. But you can get around these by following the advice below. A little headwork can save a lot of headache.

• Trust only payday loan lenders with good reputations. Remember, you’re giving them personal financial information like credit card or checking account numbers so you want to deal with honest people. On the lender’s website, look for the BBB (Better Business Bureau) logo.

• Make sure you check the annual percent rate (legally, you must be told this) and shop for the best rate. If you didn't think payday loans could be expensive before, this APR might be an eye-opener, especially when you remember that credit card usually offer 7%-27% APR.

• A few companies offer no interest loans to first-time borrowers. Find them. Be aware of the length of the loan and any other terms to help you choose the best payday loan lender. Be sure you know the total amount you’ll have to repay before you take the cash.

• Always read the fine print.

• Pay the loan when it is due, on your next payday. The payday loan period may be extended, but you’ll have to pay additional (and large) interest and finance fees. Also, if you do not repay the loan with your next paycheck, the lender may even automatically renew the loan by withdrawing the fees from your checking account. This could cause you to be overdrawn and incur penalties from both the lender and your bank.

Meet Frank: A Real-World Payday Loan Story

Frank’s car broke down and he needed $300 fast. Panicking, he went online and chose the first web payday lender he found. He filled out the simple form and had his money in his checking account the next day to be repaid in a week. The fee was $30.

When payday came, Frank couldn’t afford to pay back the $330 so he asked for an extension, which he got for another $30. So the next payday Frank had to pay $360 to cover his $300 payday loan.

If Frank continued doing this for a year, he would end up paying $1560 in fees. Most likely, the lender wouldn’t let the loan ride for that long. But this shows how expensive the payday loan fees really are, when you compare them with the interest on bank loans or even credit cards.

What should Frank had done?

• Frank should have looked at more than one web payday lender, checking for the best terms and lowest interest rate.

• After choosing a lender, he should have checked it out with the Better Business Bureau to be sure it is reputable.

• He should have had a plan for repaying the web loan before he got the money so that he could have paid the loan on payday and not needed an extension.

So, how can you do better than Frank?

Payday loans or cash advances are lifesavers for short-term, small cash problems. With thought and care, you can solve your temporary money problems quickly without making your long-term financial situation worse. Start your search for a great payday loan at a reputable website today.


About the Author
Joel Walsh suggests you start here to find good lenders of payday loans: http://payday-loan--online.com>http://payday-loan--online.com [Web publication requirement: create live link for the URL/web address using "payday loans" as visible link text/anchor text.]

Written by: Joel Walsh


(186)Personal Finance 101

 

The subject of personal finance is very broad, but as a
beginning, I would like to discuss what I consider the
foundation of personal finance: security.

Security

Security to me means that I am prepared for the "hit by a
bus" scenario.

I have life insurance to provide for my wife and children.
Health, disability, auto and home insurance policies also
provide me additional protection in their respective areas.
I also have a list of where these policies are, who my
agents are, phone numbers and basic policy information
(#s, amounts, costs, etc.) I keep this information both in a
file at my house and in a safety deposit box at the bank (a
friends home will also work - think: "house burns down"
scenario). Also my wife and my brother and sister-in-law
who live nearby also know where these things are.

I also try to maintain an emergency fund of cash in a bank
account or money market account (with checks) so that I am
prepared for a financial disaster, layoff, or natural
disaster. It took several years to build up this cash fund.
I started with a goal to have enough cash for 6 months of my
normal financial needs (mortgage, food, insurance,
transportation, etc.). Now I am trying for 12 months'
worth. I do this by saving a little each month, and
"investing" a portion of all "found" money (gifts,
inheritances, tax returns, anything unexpected).

I have a will and update it each year around New Year's to
reflect any changes in my life during the past year (new
children, new home or business, etc.). Most people don't
need an extensive will, the forms you buy at your office
supply store will do. But in some states if you die without
one, watch out. What happens to your money and even your
children could be entirely up to some state or court
appointed official.

Stability

The next level of personal finance is stability.Stability to me means that first of all I live within my means. I don't spend more than I earn. Otherwise I amspending my savings, investments, emergency money, or getting into debt. I have a lot of debt, but most of it is real estate which is producing some income. I try to avoid credit card debt and purchase everything with money I already have. I don't buy things expecting that next month I will have more money or I will get a big raise or promotion. You can't sell me a car based on a monthly payment amount; I want to know the final price!

In order to make sure that I am living within my means, I created a simple budget and I track my expenses using Simple Joe's Expense Tracker. I can tell how much I have spent in each budget category and I know when to keep a closer eye on certain types of expenses, or when and where I can cut
expenses and what I can live without in order to stay within my budget. Counting pennies is pretty tedious, but tracking where the dollars go can be eye-opening.

Another aspect of stability is avoiding or eliminating debt.Debt in itself is a form of stability; you always have tomake those payments until it is all paid off.

Some recent reports show that the average American is $7,000 - $20,000 in debt. Most of it is consumer debt: credit cards, store accounts, rent-to-own, auto loans, etc. And those types of consumer debt usually charge a higher interest rate than any savings account, CD, or money market account; even more than most high-flying risky investments.

This means that $1,000 in debt at 18% is costing you 9 times what your $1,000 savings account at 2% is producing.Consumer debt is a dangerous spiral that is very hard to getout of.

The first problem is, as mentioned before, living within your means. Don't get further into debt to support an extravagant lifestyle. Or even if you are frugal, if you are using credit cards and debt to finance your purchases, you either need to stop purchasing luxury items or find a way to increase your income to support these purchases/payments.

You may even have to lower your standard-of-living because you have racked up considerable debt and need to free up some money to pay it down. But don't wait to start. Those minimum payments are often designed to keep you paying 18% interest for 40 years! That's longer than most home loans. You could even end up paying more than 10 times the original
cost of the item just in interest payments. Is that new stereo really worth that much?

To help people get themselves out of debt we created the"Pay Off My Debts" tool in Simple Joe's Money Tools. It is also available as a stand-alone product called Simple Joe's Debt Eraser. These tools help you create a Rapid Debt Reduction Plan which shows you how much to pay on each debt each month in order to save as much on interest charges as possible and pay off your debts as soon as possible.

These tools can help you systematically eliminate your debts whether you owe $1,000 or $100,000. The key is to start living below your means and start focusing on paying off your debt.

It doesn't make much sense to be worried about whether or not your 401k earns 8 or 9% this year, if you are paying 21% on your credit card debt.

A third aspect that starts in the stability category and
transcends to the next personal finance level, growth, is the concept of investing in yourself. By this I mean
spending time to educate yourself in personal finance
matters, as you are doing right now and spending time gaining more knowledge and improving your skills or even developing new ones.

As an employee, this can have a direct relation to who gets laid off during the next round of cutbacks. If you have some skills or have demonstrated some abilities that are not possessed by your co-workers and these skills make you a more valuable employee, you are less likely to get the pink-slip.

Also while you are making yourself more valuable to your current employer, you are also making yourself worth more to future employers. It is much easier to land a job if you have some special skills that are in high demand or even if you bring some special knowledge or experience that you fellow job-seekers may have overlooked or failed to invest in.

Being in the computer industry, I have to spend hours each week reading trade magazines, exploring web sites, and reading emailed newsletters to keep abreast of what is new in my field. If I stopped learning just five years ago, I would have missed out on the Internet revolution, email, web sites and the majority of the income I now enjoy.

Keeping myself informed and up to date takes time and
resources, but it helps me protect my current income and
expand my skills to help me earn income in other areas.
This increases my stability by allowing me to not have to
rely on one client, employer or source of income. A chair
with four legs will always be more stable than a stool with
only three.

Growth


The next level of personal finance, as I alluded to before,
is growth.

Once you are secure and stable, you can begin to think about
building your wealth. Not that you have to figure out how
to become the next Bill Gates or Warren Buffet. But you
have to start building the "nest-egg" that you will rely on
when you retire.

And don't think that Social Security has you covered, or
that your 401k will grow back to what it was a couple years
ago. Or that your current employer is going to re-institute
the generous pension plans of yesteryear. 401ks are much
cheaper to administer and you, the employee, take the hit
when the market goes down, not the employer.

My father is nearing retirement age and I think he has a
good plan. He has done some research and estimated what his
expenses are going to be when he is retired. He then took a
look at his potential sources of income during his
retirement.

He figured that Social Security would cover about a third of
what he wanted to live on. Only a third! And he has worked
his entire life. Would you like to instantly have to live
on only one third of what you currently make? Retirement is
suppose to be the golden years, so where's the gold?

Luckily throughout his career, my father has worked for
companies that have had pension plans and he had worked long
enough at each company to be eligible for some pension
money. This is rare these days because today the average
worker will change jobs and companies at least five times
during his/her career. Also, as I mentioned before,
companies are switching to lower cost 401k plans that do not
guarantee you any fixed payments.

In my father's situation, his pension money would cover
another third of the retirement income he wanted. So now he
had to either figure out where the last third was going to
come from, or start cutting out expenses during retirement,
like not visiting his children so much. None of us liked
the sound of that.

So my father started learning about the stock market and
investing in stocks and mutual funds. He made a plan for
growing his wealth and then educated himself as to how he
could accomplish his plan.

I wish I could say that he is doing better than he is, but
luckily he has some time still to put his plan into action
and ride out any market downturns. (He can do this because
he has the security of insurance and emergency money, and
the stability of little debt and a strong set of skills.)

By learning about how stocks, bonds, mutual funds, index
funds, options, futures, commodities, real estate and other
financial tools work you lay the foundation for growing your
wealth. You may start with just $100 in a bank CD, but as
you learn more and become more sophisticated, you can invest
in more and more opportunities.

You will learn about how risk and reward are related, that
as the risk increases so does the size of the potential
reward. Just like at the race track, you'll make more on
the long shot, but the odds are against it. Also you can
learn how to tilt the odds in your favor and protect
yourself against risk.

For those who are just starting out in the growth phase or
who want to dabble a bit before completing the other levels
of personal finance, my suggestion would be to look into
index mutual funds. Especially no-load index funds (no
initial/sales fee).

These funds are made up of the same stocks that make up the popular market indexes like the Dow Jones, S&P and NASDAQ100. The costs are low because management is simple and as a mutual fund you can invest a little at a time.Also they are easy to follow since you see them on all the news shows and in the newspaper.

Protection and Management

The final level of personal finance is the protection and
management of your wealth. Most people never develop wealth
enough to need this level. But some of the concepts can be
applied to any amount of wealth you possess, $10,000 to
$10,000,000.

Part of the protection harks back to your will as we
discussed on the first personal finance level: security.

With any significant wealth or valuable asset (your home,car, heirlooms, 401k, IRA, business, etc.) you will want some way of disposing of that asset upon your death.Whether it is go to go your family, favorite charity, or local church, if no one knows about it, "it ain't gonna happen".

As you start to accumulate wealth in excess of $350,000, you may want to consult an attorney about creating a trust. A trust is an entity that can own property and pass that property to anyone you name in your will. Usually the trust is designed to provide income to children from the assets that are placed in the trust.

The trust can survive you so that your assets and income may be passed on to your children or next-of-kin without excessive taxation and legal entanglements. Some states will take up to 55% of your assets as taxes when you pass away.

Protection also relates back to insurance. Now it may be time to look at a multi-million dollar umbrella policy that will protect you from lawsuits designed to part you and your wealth. You may now be a bigger target, so purchase a suit of armor.

The management aspect comes into play where you may start to concern yourself with taxation, ownership, distribution of income and possibly endowments to charities or other non-profit institutions.

You may hire a person or company to manage your wealth, or you may choose to do it yourself. Most people who have earned their wealth through the "sweat of their brow" have already become adept at managing their assets. Some continue to personally manage their wealth because of the enjoyment or challenge it gives them.

Others are ready to turn it over to a trustworthy manager (who only gets paid a percentage of your increase) and travel the world, or sit on a beach and count the waves.

Whatever your dreams for retirement (and why wait until you are 65), understanding the different levels of personal finance and spending the time and resources to educate yourself will pay off whether you live next to Bill Gates or Homer Simpson.



About the Author
© Simple Joe, Inc.
David Berky is president of Simple Joe. One of Simple Joe's best
selling products is
href="http://www.simplejoe.com/moneytools/index.htm">Simple
Joe's Money Tools - a collection of 14 personal finance and
investment calculators. This article may be freely
distributed so long as the copyright, author's information
and an active link (where possible) are included.


Written by: David Berky


(187)Personal Finance 101 - Credit Checks

 

Credit cards, personal loans, mortgages and other forms of personal credit are an everyday part of financial life for all UK consumers. Looking at the figures for UK personal debt shows that Britain appears to be addicted to borrowing money and still continues obtaining more from the financial institutions. By the end of 2009 the UK personal debt levels stood at a record £1,148, with 83% of this debt consisting of secured mortgage loans. Due to the nations reliance on credit of all forms, it is extremely important to keep a close eye on your own personal financial history and keep up to date with the official credit check reports which can help prevent fraud, and make the difference between acceptance at a favourable interest rate, or outright rejection just when the money is needed the most.

In the UK there are two main credit reference agencies which hold a wide range of financial information detailing a person's continually evolving financial history, these are Experian ( http://www.experian.co.uk/>http://www.experian.co.uk/ ) and Equifax ( http://www.equifax.co.uk/>http://www.equifax.co.uk/ ). By obtaining a copy of your report from each of these sources, (as they may contain different information), you can not only check the accuracy of the information stored and look for any potentially fraudulent entries, but you can also request that any incorrect information is amended to prevent possible future credit problems.

Each lender will weigh the information contained in a person's credit file differently. However there are universal contributing factors which include:

- Electoral Roll information for a person's currently registered address. - Defaults on any financial repayment contracts, such as loans, mortgages, etc. - Employment history for mortgage, credit cards, loans, hire purchase and finance agreements. - Any County Court Judgments. - The complete amount owed and the number of credit facilities used. - The number of new credit facilities that have been applied for (both successful and unsuccessful applications). - The type of credit used. - Salary details given on the application form.

Lending organisations combine the data obtained through a credit report, along with information acquired from an application form, to produce a credit score. This score represents a measure of an applicant's likelihood to repay debts and to make any repayments on time.

If an applicant's score falls below the lenders acceptable risk threshold, or they don't fit an ideal customer profile, then the application may be completely rejected. It is also possible that a low score may result in acceptance, but at a more expensive interest rate than might usually be offered.

Some credit card providers, such as the Asda supermarket chain's finance services, now provide applicants with a copy of their credit reports with all applications, however, to obtain the best deal it is vitally important that borrowers do some shopping around. When shopping around for credit however, try to obtain as much information as possible prior to making a formal application for credit. Whenever any application for credit is made, a footprint is left on the credit record showing that a search has been made. Credit companies see lots of footprints as an indicator that the applicant may be in severe financial difficulties or even that some form of fraud may be evident. Using one of the various online financial comparison websites, such as Moneynet ( http://www.moneynet.co.uk/loans/index.shtml>http://

www.money net.co.uk/loans/index.shtml ), enables you to see what is on offer, and what general market rates are available, before any financial commitment or full credit search is required.

Even people who are not looking to obtain additional credit may find a credit report useful for peace of mind, and to ensure that their credit details are not being used for fraudulent applications, or as part of the growing disturbing phenomenon that is identity theft.


Disclaimer:

All information contained in this article, is for general information purposes only and should not be construed as advice under the Financial Services Act 1986.

You are strongly advised to take appropriate professional and legal advice before entering into any binding contracts.

Useful resources:

Moneynet loan comparisons ( http://www.moneynet.co.uk/>http://www.moneynet.co.uk/ ) Experian credit reference agency ( http://www.experian.co.uk/>http://www.experian.co.uk/ ) Equifax credit reference agency ( http://www.equifax.co.uk/>http://www.equifax.co.uk/ )

About the author:

Richard lives in Edinburgh, occasionally writing for the personal finance blog Cashzilla, and listens to music no one else likes.

Written by: R.Green


(188)Personal finance - have consumers had a belly full of personal debt?

 

For months, we were trigger-swipe happy, putting our groceries, clothes, holidays and service charges on our credit cards. We wanted mortgages, we took out loans, we watched Property Ladder and What Not To Wear. Whether you were born middle class, had middle class aspirations, you became middle class through your spending. Debt united people around the UK, we sympathised with each other on what we couldn’t afford – but it didn’t matter, we still bought it. Soon everybody had a bottle of Jacob’s Creek in their kitchen and olives and humous in the fridge.

Yet, it would seem as if a debt conscience is setting in. This morning, The Guardian printed a story based on the fact that Nationwide had reported a 0.2% decrease in the average house price, whilst the Times reported on a statement from the Bank of England, showing that credit-card borrowing was at its slowest rate for more than four years, with mortgage lending also very static.

According to the latest Department of Trade and Industry Survey, 5% of individuals reported finding their household’s debt repayments a “heavy burden” and 4% of individuals are currently behind in payments for at least one credit commitment or domestic bill over the past three months.

According to Credit Action, in December 2009, 1.2 million electricity and 1 million gas domestic customers were behind in repaying their debts to their supplier. Additionally 20% of people say that they often neglect checking their bank balance because “they are too scared to find out how much money they have”, according to Lloyds TSB.

Credit Action also reported that the number of people searching for help to manage their debts had almost doubled in May in 2009, compared to figures in May 2009 and a survey from Relate revealed that 44% of couples find money to be a contentious issue in their relationship and a quarter of people in debt are receiving treatment for stress, depression and anxiety from their GP.

It doesn’t have to be all doom and gloom however. If you’re lucky enough to have no outstanding debt, you can keep you finances in shape by exploiting the services of sites such as moneynet, which provide financial product price comparison information and extensive consumer information guides. If you have any outstanding debts, you can seek advice from the Consumer Credit Counselling Service (CCCS) or Citizens’ Advice and financial comparison sites like lowermybills and moneynet also provide detailed research on debt consolidation loans and debt management.

Resources:


Credit card guide


Credit Action

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About Rachel
Rachel writes for the personalfinanosaurus Cashzilla
Personal finance blog
Rachel has been writing personal finance related articles for six months and has learnt so much about mortgages and life insurance, that nobody invites her out to dinner anymore. :(

Written by: cashzilla


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