Archive for August, 2009

Justified Payday Loans

August 25th, 2009

Many Americans get by with payday loans often to survive some emergencies or just make ends meet to tide them over between paydays.  These loans are basically short-term personal loans made against their next paycheck. The problem lies when you start to get used to securing one often because your paycheck just can’t match your spending habit.  You end up working and making lenders prosper with their rates.  There have been critics to this type of loans.   They have lambasted the practice as being usuriously profitable at the expense of the poor struggling middle classes. But prudently used, they can be the light at the end of a dark tunnel .

A Real Help When Needed

Lifestyles have a way of overtaking one’s income level so that you spend more than what you earn.  The result is that you end up short to meet your needs a few days before your next payday.  When you know you can take a loan against your next paycheck, critics say it puts less control on your spending habits between paydays, discourages savings and asset accumulation while making usurious lenders prosper at the misery of their borrowers. 

That’s one side of the coin.  Everything has its good and bad effect.  Nuclear fission is both a bane and a boon to humanity.  So are provisions for advancing your paycheck. One can use it with gay abandon so that you end-up mired in debt.  Or you can use payday loans sparingly to tide you over when push comes to shove in your personal finances.

Renewing the Loan

When you have a secure and steady income source, you get to be confident in managing and juggling your financial sources with personal loans like this.  For many, renewing payday loans or "flipping" it over becomes a reasonable option when things start to be less than as budgeted or planned.  You pay the entire principal with interest and get another loan.   It becomes similar to paying only the minimum amount on your credit card statement.  Regular renewals are quite common with many in dire financial straits. It may be difficult to let go because effectively, you’d always be a pay period behind.  But with the hope that the economy and an anticipated increase in salary, loan renewals can eventually stop.

Extending the loan

This is a more prudent and longer term option.  When the borrower fails to make the pay-off on the loan’s maturity date, there is always the option offered to restructure the loan so that the principal can be spread and the borrower can pay in smaller but equal payments stretched out over a longer period, say three months. 

There are states where you can extend your payday advance where the borrower can restructure it into a standard or regular loan payable in equal installments over a certain period of time, certainly much longer than just a 2-week period.  This may ease the principal loan repayments somewhat, but expect additional processing charges. This is about the only recourse borrowers have if they cannot meet their loan maturity dates.  Lenders who are also members of the trade unions are to offer this payment plan extension at no cost to borrower members.  In some states like Washington, this is a legal mandate. 

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