Private loan agencies
Payday Advance companies often
come with enticing ads such as "E-Z Payday Cash..." "Cash
at your doorstep on the same day.." etc. on the FM, TV, Internet,
and in mailboxes. And they come up with a range of words such as
cash advance loans, check advance loans, or deferred deposit check
loans. They are indeed easy to secure. But are they economical?
Let's imagine someone named Ellen borrowing $3000
from a lender - creditor for a two weeks period. According to the
agreement, she writes a personal check to the lender for $3045 (this
includes the borrowed amount $302 and a $54 fee).
In the above example, the interest fees of $445 is
the equivalent of $1,1700 for a year, or 390 percent APR. This is
far higher than the APR announced by institutions such as Bank of
America for loans. But the latter require collaterals, real estate
to mortgage or some other security. Not easy for everyone.
On the ensuing payday, she either redeems the check
by paying the $345 in cash, or lets the lender withdraw the amount,
by using her personal check, from her bank. Some times she may roll
over the check by paying an additional fee to extend the advance
period, say, for another two weeks. In case she's left with no money
in her account to cover the personal check she submitted to the
lender, she could incur additional bank fees or face legal action,
for the bounced check.
It is advisable to plan finances carefully by
following a few steps as follows: calculating the total `income'
and `expenses' amounts in a month, subtracting the `total expenses'
from `total income' and monitoring the remaining amount. This simple
arithmetic will tell us as to whether the person has some savings
or not. A financial barometer!
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