A few weeks ago, I was looking over my blog for a post I did on payday loan consolidation and payday loan business lending. What I discovered about the subject was not exactly pleasant to say the least.
The main elements that are in play when taking a short term loan from the company are as follows: Cost; Interest; Fees; Recovery and Compliance. Each of these elements has some use and some harm to the consumer. To understand them all, it’s best to understand the process of the money company you are doing business with.
The primary benefit is cost; the fact that no matter what kind of short term loans you are getting, the cost is nothing compared to the cost of a credit card. Also, when they are looking at a loan application, the company wants to make sure it does not have too many charges in it. The banks require credit checks.
The lenders have lots of other information that they may need before a person is approved; the date of the last employment, income verification, and social security number. This is important because if they aren’t able to verify the information, then you won’t be able to get your loan. The whole point of the financial institutions is to recover from the loan you owe.
The growth of the industry has been due to people using very short term cash advances; first to cover a meal, or for emergencies. There is little you can do about it, but the way the lenders operate is due to their philosophy. If they were like everyone else, they would just take your money and run.
It’s unfortunate that payday loan companies don’t operate in this manner; but many still do, due to some misconceptions about payday loan consolidation. The net result is they leave the customer in worse shape. Once you get into the cycle of the whole process, it’s easier to get into debt.
For those who are taking on more than one payday loan, the advantage of consolidation is that the interest rates go down for your second loan. That’s what the lenders are after, the one dollar difference is what they need to make up. The same is true for the second loan on your home; the banks are after the same thing; the one dollar difference. It’s the only way they can make up the loss of the first loan and make you pay the difference on your second loan.
The banks will use this to entice you to borrow more than one time; because the second loan is very high risk, the interest rates are much higher than the first. This could easily lead to an inability to pay both of them. It makes it hard to keep track of your monthly payments.
When looking at the companies, don’t focus only on the payday loan consolidation. The next form of financing you should be looking into is when you’re looking at another form of mortgage. Both are companies that want to get as much money from you as possible.
When the customer comes back for a second easy day of paychecks and can pay, there will be an increase in what they can charge you. When you are already stretched thin, each monthly payment can seem like a mountain to climb.
This doesn’t leave a big chance for them to profit from their hard work. This is a vicious cycle, and the only way out is to work with the lender to make the least amount of payments. When that first loan comes out, do not panic, start working with the bank and the lender to work out an agreement.
By helping them, you are actually saving them money because they won’t be coming after you with late fees. The money they miss will come out of your checking account instead of theirs, making the loan less of a burden to you.