Payday loans give the impression that the interest is reasonable but when this interest is converted into annual percentage rates or APR, the interest balloons out considerably. The annual interest of payday loans could be six to eight times the loaned amount. This means that if an amount of $1,500 is borrowed and this loan is not paid for a year, the borrower has a financial obligation to settle a total amount of about $12,000.

The high interest rates of payday loans should be enough to create a knee-jerk reaction when someone gives a name of a payday lender. But there will be times when immediate funds are needed and payday loans beckon like a siren call. There are ways to steer clear of payday loans and here are some suggestions.

When immediate funds are needed, there are other sources of cash or loan that can be tapped into. For an employee, the most obvious source of money is a cash advance from the employer. Most employers are aware that unavoidable circumstances can place an employee in dire need of cash. This is why the concept of cash advance was invented. An employee should look into the employer’s policies regarding cash advances.

Another source of money is a loan from a family member or from a friend. Brothers and sisters may not be the most sympathetic people to approach when one has a financial crisis but they certainly do not charge high interest rates. Social mores also frown upon the idea of borrowing from friends. But friends also do not charge high interest rates.

To make the loan from either family or friend less of a charity and more of a business transaction, create a written agreement about the loan. The agreement need not imitate the legalese of loan contracts. It needs only to indicate the amount loaned and the promised date when the loan will be paid off. In some cases, the written agreement may indicate an extended method of payment in which dates are listed together with the amounts to be paid on those dates.

The other sources of emergency cash can be small loans coming from credit unions or cash advances from credit cards. These loans charge interests but their APR is several times lower than that of payday loans. When considering a cash advance from credit cards, it would be advisable to choose the credit card that imposes the lowest APR on cash advances.

Of course, the best strategy to steer clear of payday loans is to avoid situations in which cash is needed and there is no saved money available. To avoid such situations, there are a number of things that any determined person can do. The first of them is creating a budget in which the expenses should not be higher than the earnings. Spending less is all about living below your means and preventing the self from buying stuff that are not really needed.

Another technique is to set aside savings first before creating a budget. For example, an amount of $50 is placed in savings from every payday. The savings will accumulate and will become the best source of money in times of emergency.

The financial danger of payday loans cannot be overemphasized. A sensible and rational person should consider alternatives to obtaining funds rather than getting a payday loan.

You cannot manage something you cannot measure. But it does not necessarily mean you should have all the details to have a good start. The initial things you should be aware of to re-establish your financial existence is to calculate how much you owe, how much you earn and how much you spend on a given time period.

The end result may shock you but it is better that way before it is too late. Get a pen and paper and start listing all your debts. Include every debt from mortgages, loan payments, insurance, utility bills, to travel expenses. Also, take note how much is the interest rate and minimum monthly payment for each debt. Having all these important information will help you manage your debts and make better decisions.

Obviously, you need a source of income to pay up your debts. If you have extra and part-time jobs I guess it is time for you to take it seriously. At least estimate how much is your expected earnings from each job on a monthly basis. Combine it with your monthly salary from a regular job.

Unfortunately, it is not only debts that you have take care of, at least for now. Your expenses should account for all basic needs such as food, rent, utility expenses, gas, etc. Up to this point, you should already have an approximation of your capability to pay all outstanding debts.

This is the point of no return so brace yourself. Deduct all your expenses from all income and it should give you the remaining amount you can use to pay off your debts. Hopefully it is a positive amount. If it is, then it is a good sign. If not, that is another concern for you to be worried of. It is also possible and recommended to use part of the remaining amount to place in savings. You could use it for future unexpected expenses - one probable reason that caused you incurring debts.

If you reach this point you have a reason to celebrate so do not lose the momentum. Check all details of each debt and prioritize which one to pay first. Be sure to make a commitment to pay regularly. It may take years to reduce and wipe all those debts but it is better than adding more to it.

Getting out from the rat race of debt payment does not require sophisticated strategies. As simple as knowing your total debts, income and expenses can help you find and formulate better options. These practical initial steps of course should be accompanied with other useful information such as payment policies of your creditors, and the different credit options you could avail. Most importantly, you should have the right attitude and mind-set to be victorious in getting out of debt.

If you need a smaller sized loan fast, you may be torn between the payday loans that you see advertised frequently and a regular short term loan. It is important to understand the differences to ensure that you make the best choice for your situation.

Fundamental differences

First, it is important to evaluate the usage of each loan. A payday loan is most likely to be useful in an emergency – you need a small amount of money fast and cannot wait for approval. As the name implies, it would be a small amount of money, not more than you make in an average pay check. On the other hand, a short term loan is generally for larger expenses that you can still pay off quickly, such as a home repair job or paying for a wedding.

The basics of short term loans

Short term loans (example : ThinkCash Short Term Loans) are generally unsecured, meaning that you do not have to provide a form of collateral to be approved. The repayment varies between lenders and loan types, but on average, most short term loans have to be repaid within 5 to 15 years. The actual amount that you can get approved for also varies, but generally these loans are for under $50,000.

The main disadvantage to short term loans is that they are more expensive than other types of loans. They tend to have a higher interest rate to make up for the lack of collateral. The better your credit rating, the more likely you will obtain a better rate, but you will still want to shop around from lender to lender for your best rate. If you have bad credit, you may still qualify for short term loans, but be advised that you will not be able to take out as much money or qualify for the best financial terms.

Understanding payday loans

Payday loans (example : PayDayOne) are well advertised in the media, and they may appear to offer many benefits. While they may seem to be the answer for someone who needs money now, you have to be careful in ascertaining whether loan is worth the cost. What many of these lenders do not bother listing in their advertisements is the cost of the loan, the difficult loan term, and the exorbitant annual percentage rates.

A payday loan requires the borrower to write a postdated check. You generally will need to provide a pay stub from your job to qualify. The lender will then give you cash, but it will be for less than the amount of the check. The difference is the lender's profit. On average, payday loan lenders will charge $15 to $50 for every $90 borrowed. This money only covers the term of the loan, which is generally about a month. If you do not pay the money back by that time, you could be subject to even more finance charges.

The problem comes if you do not have the funds in your checking account when the time arrives for the lending institution to cash your postdated check. Some consumers will then fall into a cycle of taking out a new loan to cover the old one, acquiring new fees each time. If they cannot pay back the loan quickly, they can quickly end up with a huge amount of debt and no way to pay it.

Generally, if you have the option, a short-term loan is financially better than a payday loan. However, if you need the money quickly or for an emergency, then a payday loan can suit your needs; you will simply need to ensure that you have sufficient funds in your checking account to cover your postdated check. The two options meet different needs and financial circumstances, but when you understand the fundamentals, you can make a great choice for yourself that will not impede your long-term credit score.

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The electronic age has arrived. Many consumers, investors, and entrepreneurs transact their business over the internet. An ordinary depositor can go online and open a webpage that contains information about his checking account. From this webpage, the depositor can make fund transfers, pay bills, and do a host of other financial transactions. The internet is a great tool for people who wanted to save time from waiting in line inside the bank premises. But the internet does not have the reputation of being the safest place. There are many fraudulent activities conducted over the internet. The internet can be a medium for criminal activities.

With this nature of the internet, a potential borrower may want to reconsider an application for a payday loan. He may want to hit the escape button or click “cancel” instead of choosing “ok” or “send application.” This is because there are many risks in obtaining payday loans from internet lenders. The two most documented consequences of acquiring a payday loan online are identity theft and loss of bank security.

Identity theft is a potential threat when obtaining payday loans using the internet. With online payday lenders, the borrower must fill out an online application form that demands personal information such as the social security number. This social security number should be given only to trusted institutions and not to anyone. A stranger can access much information about a person by simply using the social security number.

This means that the online payday lender may not be a real lender but a phishing site. Phishing is obtaining personal financial information by asking the internet surfer to fill out and then send forms. The real banks and credit unions have placed safety measures against phishing. Their web addresses contain the “https” in which the added letter “s” means a secure site. For many internet payday lenders, there are no measures taken to secure their site from hackers.

The loss of bank security is a grave consequence of using online payday loans. These internet payday lenders will always ask for the borrower’s account number and routing number. Their reason sounded legitimate. The account number and routing number will allow the internet payday lenders to deposit the amount being loaned from them into the borrower’s account. But, the disclosure of account numbers will also allow the lenders to withdraw from the borrower’s account. Thus, it is a possibility to end up with zero balance instead of obtaining the loaned amount.

The security measures placed by banks and credit unions become powerless when the borrowers give their consent to payday lenders to automatically renew the terms of the payday loan. This automatic renewal means that the lender can keep withdrawing the finance charge from the borrower’s checking account every payday. Unless the borrower contacts the lender and makes specific arrangements to pay the loaned amount in full, this withdrawal will continue and the debt is never paid. The automatic renewal implies that the borrower will need to take another route of action to pay off the debt.

Of course, the borrower can file a complaint against the payday lenders. But such complaints can be quite difficult for internet payday lenders because they rarely reveal their actual location. Some internet payday lenders even claim that their office is outside the country. Nevertheless, the Federal Trade Commission assures that any complaint filed against lenders must be filed in the state where the borrower lives. The payday loan is also subject to the laws of the borrower’s state.