• One of the easiest things to do is stop eating out. Sure, that dollar menu at your favorite restaurant might be a grand idea, but it takes its toll on your wallet slowly. For the same amount you would spend on that dollar menu over two days, you could get a loaf of bread, some lunchmeat, and some fruit or veggies. Sure, it is not as easy, but the price per meal is cheaper and it is healthier for you in the end.
• Next up is to do a rotating lunch with your friends or co-workers. At first this might seem like somebody will get shafted, but if worked out well this can be a very useful way to get a free lunch. You will need to work out the places of eating, who pays when, and try to keep the same amount of people going every time. Once this is established, one person will pay for lunch and the other take advantage of that hospitality. Remember this when it comes to your time to pay.
• If you need more than lunch, you could barter your time for a few dollars. You might think this to be foolish, but you would be amazed at how many people are willing to pay a few dollars for a bit of work. Just ask around your circle of friends, or co-workers, if anyone wouldn’t mind the use of your services. Manual labor is the easiest thing to trade for a bit of change. Trading your skilled services works out even better. No matter how you shake a stick at it, this can be the easiest burger you have made.
• Lastly there is the bumming a buck method. Nobody really likes this because it is so hard to do, especially for men. This is just simply asking someone for a bit of cash to get by until your payday. This is much better than going to a loan place as a loan from friends or family will usually be interest free. Keep the asking to a minimum and you could be surprised at how willing people will be to snag your lunch or put some gas in your car. To sweeten this deal, make sure you pay them back as soon as possible. If you can, give them a bit more as a way of saying thanks.

These are just a few suggestions to help you in these trying times. It might always look like the grass is greener on the payday loan side of the fence, but there are often ways to keep from jumping the fence. Payday loans have their place, but that place is in a far away land.

Photo via Lee Fenner

The loan place might not be sending thugs out to break your fingers or give you a pair of cement shoes, but they are just as nasty. They are going to charge you all they can for that money you are looking to ask for. You usually have a short period of time to pay it back. If you don’t pay it back, your financial troubles just got compounded. Let’s take a stroll down this road and see why the payday loan is not such a good idea.

You need some money to pay the gas bill and get food. You skip on down to the corner loan service. They loan you $200 and you write them a check for $230. You just paid them $30 to snag $200. Happy in this decision you cash the check, get some food, and pay the gas bill. Life is grand for two weeks.

Boy did those two weeks fly by though. Now you have to pay the loan company back. They can cash your check you wrote, or you can pay them cash and they can give you your original check back. The problem is now the power bill is due and you can’t afford to pay off the loan you just out two weeks ago. So you run to another loan place to pay off your original loan. Now your first loan is paid, the power bill is paid, and you have another two weeks to get by.

The process can keep going. Some of you might have been able to pay off the original loan and not had to take out another loan, or four. There are people who cannot do this though. What happens when you can’t pay the loan back? That seemingly “low” interest rate the loan company gave you sky rockets into something only Donald Trump would think about dealing with. All this trouble then is reported to the credit agencies. Collection agencies are called. This whole process can turn ugly quick.

Payday loans promise quick cash when you are in a bind. Those who can pay this loan off right away might consider this as an option. However, if you don’t have the money now, most likely you will not have it in two weeks when the loan is due. If you are considering this option, it is strongly urged to look at borrowing from family or friends first. Besides, they are most likely not going to come after you with Bruno and Johnny to get the money back if you have to pay in three weeks instead of two.

Photo via eisenbahner

If you do find yourself with a payday loan, it’s important to pay it off fast and not renew it. When you renew a payday loan, you can compound your financial problems. You want to get it paid off and leave it alone, and avoid taking another one out in the future.

Still, there are some good ways and bad ways to pay off your payday loan. Here are a few things you should not do to pay off your loan:

• Take out another payday loan from another lender. That should go without saying, but people still do it. Taking an additional payday loan is bad enough, but if you go to another lender you can actually compound your financial and credit troubles. You’re trading debt between debtors and you’re losing a significant amount of money each and every time you do so.
• Take out a larger payday loan from the same lender. In some cases, you may be strapped for cash and need to cover not only the principal on your payday loan, but the fees as well. For example, you might have a payday loan for $200 that cost you $30 in fees. You then take out a loan of $230 with fees of $35 to pay off the original loan. In two weeks, you now owe $265 and have to take even a bigger loan. This is hot the direction you want to go.
• Anything illegal. It’s not like you’re trying to get together money to pay off the mob. Payday lenders have to follow the same laws as everyone else. They’re not going to send someone to break your legs, so there’s no need to knock over a gas station or steal from your employer just to save interest charges on a payday loan.

Photo via PinkMoose

Still, you need to find a way to make progress. You need to reduce the amount of your payday loan debt every payday, even if it’s just by a little bit.

Something is better than nothing

Again, if you can just pay off your payday loan, do it. You’ll save a bunch of money. If you can’t, though, you need to make progress each payday.

Let’s say you owe $300 on a payday loan and that the fee for the loan is $20. That means on payday you have $320 due. You have to pay off the loan, of course, but you may not then have enough money to live on. So, you need to take out another payday loan, but this time try to take less.

Maybe you can take $250, for example. Your fee might be $17.50, but next payday you’ll only own $267.50 rather than $320. If you can reduce the amount you owe by just $50 each payday, you’ll get the whole thing paid off within about 4 months. It’s not ideal, but it’s better than paying it for a year.

A breather can help, too

So, let’s assume that you do need some of that money to live on, as in the above example. Who says you need it the same day you pay off your payday loan? You don’t. Wait a few days to take out your next payday loan. If you can wait just 4 extra days, within three or four pay cycles you’ll have an extra paycheck in there somewhere, and will have saved yourself quite a bit in fees.

This approach, when you combine it with the idea of paying at least some of your loan off each time, will help you to get your payday loan paid off quicker and save you money.

The payday loan area is no different from other areas in that there are scammers pretending to offer a real product but who are actually just trying to steal your money. Unfortunately, some people come to believe that all payday loan businesses are shady, and are part of a scam.

Of course, you need to recognize when you’re facing a scam. Any time that someone asks you to give them money before they give you a loan, you might be facing a scam. The one obvious exception is a home loan, where you have to pay closing costs and such associated with the mortgage before it’s all finalized.

Payday loans are legitimate, and in most places they are legal. Having said that, they’re also undesirable. If you can avoid taking a payday loan, you should.

Why is that, exactly? Well, payday loans charge extremely high rates of interest. The percentage you pay for a payday loan is likely to be as much as ten times or more then amount of interest you’d pay on even the highest-rate credit cards.

Another reason payday loans can be undesirable is because the term is so short. At first, this seems like an advantage. The short term means there is less interest charged, overall. The problem is that most people who take out a payday loan do so on the same loan more than once. On average, it takes three pay periods for a payday loan to be paid off, which significantly increases the amount of fees you’re going to be paying.

Yes, payday loans are legal. They’re legitimate. They’re also a measure of last resort. Before you take out a payday loan, make sure you can’t get the money anywhere else, and make sure that you absolutely can’t wait.

Photo via notsogoodphotography

Yet, some folks continue to take out payday loans, and sometimes to take them out week after week. They argue that the payday loan fee is relatively small, regardless of what the interest rate on the sheet of paper they signed says.

“So, what if the Annual Percentage Rate is 400 percent? I’m not borrowing for a year, just for 2 weeks” they say. Then, they wind up renewing the loan over and over again, sometimes for a year or more.

Let’s take a look at some of the basic math involved in a payday loan. Let’s say your lender wants to charge you $8 for each $100 you borrow. That’s not too bad, right? It’s actually very low – many payday lenders may charge as much as three times that amount. For argument’s sake, though, let’s stick with the $8 per $100 borrowed.

If you need $200 to get your car fixed, you’re going to pay the lender $16 to get you through until next payday. That doesn’t sound like a bad deal. Here’s the problem, though: chances are you didn’t budget $200 from that next paycheck to fix your car, either. So, you’ve got to cut back somewhere else (think Macaroni and Cheese for 2 weeks) or you’re going to have to renew the loan.

The majority of borrowers renew the loan for at least one more pay period. So, let’s say you do just that. Now, you’re at $32 in fees for that $200. It’s getting a little bit hefty, now. Now, you’re at or past what your bank would charge you if you’d have bounced a check.

So, come next payday, you decide that, no matter what, you’re paying part of the loan. So, you pay off $50 of it and renew the rest. Now, you’re up to $44 in fees. If you do the same thing for the next two pay periods, you will have had the loan for about 3 months and paid a total of almost $60 in fees.

The truth is that it takes most folks much longer to pay off their payday loans without renewing them, and by the time it is all said and done they’ve paid more in fees than the original loan amount. That’s just not a sound financial situation. Unless you’ve got no other recourse and it’s a matter of something that can’t wait, you should avoid taking a payday loan.

Photo via lisa_eglinton

However, there are times when payday loans are expedient and useful. Here are a few reasons that payday loans rock:

1. There’s no risk of a broken leg. While critics will compare payday lenders to loan sharks, the fact is that if you don’t pay back a payday loan no one is going to come and break your leg. They will turn you over to a collection agency, which can be annoying as hell, but they won’t break your leg.
2. It beats getting fired. Sometimes, you gotta make the hard choices. Sometimes, it’s a choice between taking out a payday loan to pay the repair bill on your car and being able to get to work. Yeah, you should explore other options, such as borrowing money from a family member or even taking the bus to work until your next payday. But, those aren’t always viable options.
3. A payday lender isn’t going to judge you. They’re used to working with folks with bad credit. They’re not going to peer down at you from across their desk and complain about how you paid your mortgage late for the past six months. They’re going to ask you how much you want, ask for proof of your income, take your check, and give you money.
4. A payday loan is a measure of last resort. You don’t ever want to get to the place where you have to take out a payday loan. But, it’s nice knowing that it’s there if you wind up needing it.
5. You can get them just about anywhere. The payday loan business has expanded greatly in the past couple of decades. There are even payday lenders who will loan you money online. Depending, of course, on the regulations in your state, you may not be able to get a payday loan at all, but if they are legal in your state chances are there’s one next to every Starbucks.

Photo via notsogoodphotography

There are times, however, when taking out a payday loan is just a bad idea. If you’re thinking about taking a payday loan and any of these conditions applies to you, think twice:

• You won’t be able to pay it back right away. The point of a payday loan is that it’s a short-term loan. If you can’t pay it back on your next payday, you have a problem. You need to be able to pay it back right away in order to keep the fees from getting out of control. Otherwise, you wind up in the trap of having to take out a payday loan over and over again, racking up all sorts of fees in the process. Within just a few weeks, chances are pretty good you’re going to have paid in fees as much as the loan was to begin with.
• You really can wait for the money. In some cases, people just get impatient. They want to buy something, and they want to buy it today. So, they take out a payday loan. This is also a bad idea. If you can afford it, and if you don’t need it to get through until payday, you don’t need it today. You’re better off waiting a week or two until you can afford it.
• You have access to other forms of credit. Whether it’s a credit card or a personal loan or your savings account, you should exhaust other resources before turning to a payday loan.
• You want to buy something on sale. The math just doesn’t work here. You’re almost always going to wind up paying more in fees than what you would have saved if you bought the sale item. Skip it for now. It’ll go on sale again.
• You need to buy food or other essentials. If you’re in that dire of a situation, there are plenty of organizations that will help. From your state agencies to charitable groups, there are plenty of folks willing to lend you a hand without charging you huge amounts of interest.

Photo via Kyle May

Unfortunately, just because there isn’t a brick and mortar payday loan store in your town doesn’t mean that there aren’t people who want and need short-term loans. So, many of these folks will turn to the Internet.

There are plenty of payday loan companies on the Internet. Today, there are a greater number of more Internet-based payday loan providers than there have ever been. Many of these businesses are legitimate, to be sure, even if their fees and interest rates are much higher than what consumer advocates think they should be.

There are also plenty of scam artists out there. There is the case of a woman in  Maryland who wound up paying nearly $1,000 to a scam artist who promised to then loan her $5,000. Needless to say, the loan never happened and the woman wound up in more dire financial straits than she was before she turned to the online payday lender.

Part of the problem is that consumers just aren’t educated enough, in some cases, to recognize a payday loan scam online. You need to understand that any legitimate online payday loan company isn’t going to ask for any money upfront. The fee that you pay for the loan will be taken out of your checking account at the same time the amount you borrowed is taken out – usually about 14 days after you take out the loan.

Ultimately, online payday loan (like most things in life) are a case of buyer beware. You need to make sure the business you’re about to work with is a legitimate business, and that they’re following the law. If you suspect that a payday lender is illegitimate, you can also report it to the Federal Trade Commission.

Photo via Don Hankins

They complain so loudly that the FTC even has a payday loan warning on their website.

So, what’s the problem? What are people worried about? Well, there are several issues that opponents of payday loans raise:

1. High interest rates. Payday loan rates typically range in the hundreds of percent when calculated as an APR (Annual Percentage Rate). Even the worst credit cards tend to max out at somewhere around 30 percent APR, and these numbers are vastly above the 10 percent or less that most consumers can get on auto loans and car loans. Opponents see these high interest rates as predatory and usurious.
2. Nefarious connections. Some opponents of payday loans suggest that these businesses are connected to the mafia or some other criminal element. For the most part, these kinds of accusations seem to be unfounded and probably more based on the idea of the mob-based loan sharks that you’ll find in the movies.
3. Racism. A disproportionate number of minorities take out payday loans. This leads some opponents to suggest that the real reason that payday loan companies are in business is to make sure that poor minorities stay poor. This kind of class warfare talk is also used to rail against pawn shops and “buy here pay here” automobile dealerships.
4. Property values. In some cases, opponents of payday lenders are really more concerned about what’s happening in their local community in terms of property values. Payday lenders often have bright and sometimes gawdy signage, for example. In many cases, property values of nearby businesses may drop when payday lenders come into town.
5. Payday loan rollovers. Many opponents of payday loans talk about how borrowers wind up taking out one payday loan after another, and thereby wind up paying fees over and over again. They suggest that a 14-day term, which is pretty standard for payday loans, is too short a term for any loan and that it almost guarantees that the borrower will have to take out at least one more loan before they can get the whole of the debt paid back.

Photo via aturkus