Are There Alternatives to Pay Day or Cash Advance Loans?

Consumer advocates may criticize pay day or cash advance lenders, but they offer no alternative. If lenders who make these loans are banned, what follows could be worse.

Negative government reports, consumer advocate studies, and investigative journalists for newspapers and television, have all taken pay day and cash advance lenders to task for their so-called loan shark activities. These protectors of the common good do have their points, but they offer few alternatives. When folks are in desperate need of cash, when they need the money quickly, there are no viable alternatives. Credit card companies, banks, and other traditional financial institutions are not too interested in loaning $500 to $1,000 to folks in dire need and often with less than stellar credit ratings.

Banning Pay Day or Cash Advance Loans

A market exists for lending money to people who need cash fast, and a legal market is the best answer. What would happen if pay day or cash advance lenders were banned? Law enforcement authorities would soon discover that back alley lenders, organized crime lenders, and other loan sharks will have stepped in to fill the void, exposing otherwise law-abiding citizens to the world of crime. And the enforcement wings of these loan sharks do not just break legs when a borrower cannot repay them on time. Whole families could be practically held hostage for a $500 loan.

Loans Are Interest Rate Heavy

Indeed, pay day and cash advance loans to carry substantial interest rates, far higher than those from traditional lenders with credit scores and collateral to underwrite the loans. But many of these folks do not have valuable property or acceptable credit histories. The fact is, the alternative to not being able to come up with cast in an expedient manner, could cause the borrower a lot more than just footing a high interest loan for a short period of time.

Interest Rates Vs. Financial Relief and Peace of Mind

Lack of cash can mean utility services being interrupted, going without medications or medical treatments, inability to purchase equipment for a business, job, or home necessity,and late payments along with further blemishes on credit reports. The interest rates, while high, are probably a small price to pay for financial relief and peace of mind. Because of the great risks a lender assumes offering these loans, the interest rates may be somewhat justified.

Improvements Needed

Perhaps the biggest problem, next to the high interest rates, is the short term requirements regarding repayment. Often, the very next pay check the borrower receives is eaten up by the repayment. One pay period is often not enough for a borrower to regain their financial bearings. They may have to keep extending the loan and that is where the real interest rates start to go into the loan shark realm. Often, a borrower can get so overwhelmed that they soon are making payments only on the interest.

Last Word on Pay Day or Cash Advance Loans

Many companies, in the onslaught of borrowers needing pay day or cash advance loans, are starting to change the terms of their loans so that they allow up to three months for repayment. They are responsibly addressing the needs of folks in these recessionary times. Three months is often long enough for people to get back on track financially. Unless someone can come up with a better legal alternative, a market exists for pay day and cash advance loans. That market, of courseHealth Fitness Articles, should be carefully monitored.

Understanding Unsecured Personal Loans

An unsecured personal loan is a loan that has no collateral attached to it and because of this there is usually a limit on how much you can borrow. Quite often if a larger amount is needed you will be able to take out more than one unsecured loan at any one time but these will need to be from different companies.

Although this type of loan is not hard to obtain you will often be required to pay a higher interest rate for the privilege.

Unsecured loans can be taken out for many reasons; you may be looking to buy a new car or for home improvements or even to increase your credit rating if you have had problems taking out a loan in the past.

If you are taking the loan out to improve your credit score it is important that you keep up the payments and never make a late payment or miss one as this will effect your credit score in the future.

By improving your credit score you will increase the chances of getting a lower rate loan in the future saving you a huge amount of money.

Taking out an unsecured loan to consolidate your debts could prove challenging as your debts are likely to be larger than the maximum loan amount you can borrow for a specific company and because you may be asked to pay a high interest rate you may find you are not that much better off.

It is important to calculate this properly, work out how much you owe and how much interest you are paying on all your loans and credit card to determine if and unsecured loan will in fact benefit you.

The advantage of consolidating your debts is you will only have one loan to pay off, however once this is done it is very easy to begin running up debts on your newly cleared credit cards so it is important to have some form of financial plan in place and know exactly what you can afford to pay out each month without spiralling into more debt.

If you have decided an unsecured loan is for you then it is wise to shop about, there are many companies that will give you a quote over the phone or online as well as face to face. Be aware that there are also scams out there so a recommendation from a family member or friend is always a better option.

Ask friends and family if they can recommend a good reputable company that you can trust and you can also check on the internet for reviews and comments on specific companies.

Unsecured loans are a good way to generate some extra cash or pay off existing debts but be aware that because they are unsecured it does not mean you have no risk of losing something normally your house should you not pay it off and bear in mind missing a payment will effect your credit score in the future so it is important to keep these up to date.