Payday Loans and Cash Advances

With the best of intentions, come the worst repercussions. Whether a payday loan or cash advance, these loans are intended to be short term. Loans which have extremely high fees or exorbitant, usury levels of interest. Typical borrowers are low-income earners borrowing with good intentions. Today economy lenders are seeing more and more middle income borrowers who have hit tough times also. The criteria for these loans are simple.

Typical requirements include a job, $1,000 income per month, a bank account and proof of residency. Vendors number by the thousands on-line and are more than willing to wire a loan directly to your bank account and draft a payment automatically every payday. Loan offices populate strip-malls where borrowers can walk in, get approved and walk out with cash in less than an hour. All will point out these are intended to be short-term loans, sometimes even with suggested payoff dates. Vendors such as Ace Cash Express actually have a limit of four payments to pay off a loan-and encourage payoffs then reapply for a new loan.

Where the simple idea of a small loan of “just a few hundred dollars, just till the next payday” seems like a life-saving solution, many borrowers in these troubled times get caught in a revolving door. One borrower of such loans says the best thing about a cash advance is the relief instantly felt with the ability to meet necessary financial obligations. And the worst thing- getting caught up in a vicious cycle of paying only the interest and not paying on the principal until the fees that you paid are double or even triple your original loan.

Recovering from a payday loan takes discipline, planning and budgeting. Take a good hard look at the reasons and events that led up to needing a loan in the first place. Vow that once you pay the loan(s) off you will make no more. (Many borrowers actually have as many as three or four loans going at once. The second loan was taken out to pay for the first, and so on.) You need to write down a detailed budget. If you don’t have a computer and budget or finance program, do it the old fashioned way. Get out pencil and paper , then write down all your bills, your daily expenses, and your income. Take a good hard look at purchases. Be brutal with yourself. Be truthful. Include it all, the vending machines, drive-through meals, cell phone extras, and all the little perks you may have allowed yourself.

Next, review and revise needs versus wants. Ask yourself, is it life sustaining, is it absolutely necessary, a must have? If your life depended on it, could you live without a cappuccino or those extra channels on the cable TV? One budget minded young woman I know has no TV. She watches shows on her laptop and listens to the news on public radio. Concentrate on your needs first and pare them down as far as you can.

Look at your loan(s). Are you really paying $105 dollars every two weeks on a $400 loan? Add up how much you have actually paid in fees or interest, not counting the principal. Now that you have seriously noted how much money you have literally lost, no, how much money you have thrown away, it is time to get serious. If you can’t find a way to increase your income, then you need to find ways to reduce your debts.

The key is keeping track of what you spend, how much you owe (and why), and what income you actually bring to table. If times get really tough, there is absolutely nothing wrong with reverting to a cash only basis and putting little notes on your dollar bills noting money for rent, gas, food, medicine, etc.

No one wants to take a hard look at themselves, but in order to save yourself from yourself and the payday vendors-get organized, write it down, and plan it out. You can get out of the pay day loan cycle. You just have to plan it out. Sounds simple. It isn’t. It is tough. It takes time. It takes dedication. You must do your due diligence to yourself and to your family. First things first, just start writing it down. Visualize your life on paper. Make a calendar. Write down when what gets paid and keep track. Once a pattern starts to emerge you will be able to formulate a plan for yourself.

As for the payday loan(s), at the expense of some other bill not getting paid once or only getting paid partially, plan on paying off your loan(s) in the shortest amount of time possible. Negotiate with your utilities to accept partial payment (negotiate before they turn off the power, not after). Use this time to eat healthier and leave junk food off the grocery list; do whatever it takes without endangering yourself or family to payoff these vultures, ahem, loan vendors. Vow then, to do everything in your power to avoid such temptations in the future. (If you must avail yourself once more under dire circumstances, then plan on paying off the loan in its entirety on the very next payday).