Caution on Faxless Payday Loans

Payday loan may offer the fastest processing time for your loan. Even though you don’t have a good credit standing, this type of loan is still available for you. Most of the companies only require you to be on legal age and have a job and in an hour or two you will immediately have the money you want. Of course the loan you can apply for is based on how much you earn. But with all this convenience this type of loan has one of the highest interest rates in the market today.

Payday loans sound great at the start but the interest rate as we have indicated is higher even when you compare them to credit cards. The average interest rate for a payday loan is at 39%. Usually it will never be noticed since payday loan companies will give you an interest rate for two weeks only.

For example, you loan an amount of $100 payable within two weeks. The interest for that loan amount is usually at $20 so at the end of two weeks or when your payday comes, you have to pay them $120 for two weeks only. What’s even worst is when you can’t pay them in two weeks so another 20% is applied for the next payday and your debt balloons to $144 ($120 + 20%). In less than a month, your loan amount nearly double if you miss a single payment.

This practice is common to local and online payday loan companies. However, the process of approval is slightly different. Local payday loan companies could give you cash instead of depositing the money to the bank. Online companies on the other hand have to send the money through the bank into your savings account or they could send the money through money transfer companies such as western union.

Online companies on the other hand, usually don’t require their debtors to bring documentation before they are approved. In the early days of online payday loans, companies would usually ask their debtors to fax over some information before they get approved. Today, prospective debtors would only need to fill-out some information online so that they will be pre-screened.

As soon as they see that the candidate qualifies based on the initial information, they call the candidate to screen him or her further and ask specific questions. If they qualify or after some information have been cleared out, they will receive the money through their bank or through local money transfer service.

The difference of online payday loan companies is that most of them offer flexibility on how to pay your loan. You can combine the interest rate with principal and pay them all at once or you can separate the principal and interest rate and pay the principal first while catching up on the interest rate. That means you will be paying the principal first and let the interest accumulate interest more but since it’s lower, you should be able to pay them easily.

That set up actually is not the same and could be even worst. Separating the interest and the principal and building them as a two independent “loans” requires you to pay the principal on time. When you are able to pay for the principal, the interest will be applied with interest. For example, when your loan is at $1000, your interest is $200 for two weeks.

You may be able to pay the principal amount ($1000) but your interest rate is still there. Since you missed the payment on the interest, it will automatically increase based on the interest rate. In the end, you may have paid $1000 but your debt is still at $240 ($200 + 20%).

I would suggest following Money Saving Tips and strict budget rules, so that helps you to save money rather going for payday loans.  There are many ways you can save money, I have written many basic things and simple changes in life can save money and eliminates the need to go for Stupid payday loans.  It’s only one pay week you will need to survive and save money, so coming pay weeks can be easy and you will not have to go for payday loans.

I know it’s difficult to avoid such difficult situations, but paying little more attention to your wallet and life will help you to save money for you and your family.