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Payday loans online facing ban due to high interest charges

Payday loans are short-term loans that can come quite handy in times of need. You have to pay back the money that you borrow in the span of two weeks or until the next payday. There is a small one-time fee attached to the loan, usually to the tune of $15 to $25 per $100 that is borrowed. This has been quite a boon for people who live from check to check and those who do not have a good credit rating. As credit card companies run a credit check before giving the loan, there are a few conditions attached in case of payday loan-the person must be a US citizen, be above 18 years of age and must be working in a stable job or have a business with a consistent flow of income.

Few people know that a good 15 years ago, payday loan companies used to loan money to some fast food franchises. But in the past few years, these companies have entered main-stream and have tried to fill the void that people experience whenever they want to get a loan for short-term needs. In case of payday loans, a borrower has to write a check for the amount that he wants to borrow and the fee, postdated to the next payday. If the person is not able to pay the full amount of money in the stipulated period of time, the balance is rolled over with the interest. For instance, if he borrowed $500 loan and there is a $110 fee attached, for the next month, he has to pay $6100 in the next month ($500+$110).

There are many consumer representative bodies that are looking at payday loans as an unnecessary menace, these loans are considered ‘predatory’ by them because the fees correspond to a 300 percent interest rate. There are twelve states in the US that have banned payday loans and the Congress in 2006, had also passed a legislation to limit payday lending to people in the armed services.

In 2009, there was a financial system reform bill that was passed by the House that stressed on a new consumer agency that would regulate payday loans and put a cap on the interest. In the Senate, a bipartisan bill was worked out by two members of the Senate banking committee. The proposal said that a new consumer agency would lay down rules for nonbank financial companies forward by a s like payday lenders but these rules would be enforced subject to a petition asking for a regulatory body to put things into action. Consumer advocates found the process long-winded and said that there was a need for a democratic measure in place to keep a check on unscrupulous costs put by payday loan companies

Payday Advance Loans, Personal Loans and You

It is very important to have money. Every move you make everyday needs cash. The food you eat, the clothes you wear, and the car you drive to work require money. But because of the current economy, money can be hard to come by. Thankfully, there are payday advance loans and personal loans you can avail of. You can borrow from a bank or a reputable payday lender. These loans are often unsecured and can be availed in smaller sums only, just to help tide you over until your next paycheck.

The Lowdown on Loans

Loans are taken by people who are in dire need of cash. Sometimes, unexpected expenditures arise that need to be paid off immediately. But they may not have enough money to cover it. Taking out a personal loan or an advance payday loan can be the best solution. Choosing to borrow from the bank you are banking with is a great idea. Since you are their client, you can expect a higher amount of loan from them. In taking out any type of loan, always consider your ability to pay. Think of your income and expenses first. The global economy is shaky at best. The stock market has suffered losses and the salaries people have are not often enough. Do not attempt to take out a loan you cannot pay at all. It may sink you deeper into the debt pit.

Payday Advance Loans

From its name, payday advance loan is an advance against your coming paycheck. You will not be asked to submit many requirements, usually just your checkbook and proof of identifications. These are loans of relatively small amounts, usually like $500 and $1,000. You will be asked to issue a check for the loan amount and plus the lender fee. Make sure you read the terms of agreement thoroughly and ask for clarifications, if you have any. These loans can easily be acquired by working individuals because their paycheck serves as guarantee for the loan.

Personal Loans

Generally, a personal loan is between two individuals. But personal loans can be taken from your bank. These are generally unsecured and can be used for whatever purpose you wish. Like payday advance loans, they are also in small amounts. But personal loans can also be secured. If you wish for a bigger loan, you can use your house as a collateral or security. Secured loans have generally lower interest rates than unsecured loans. The terms for secured loans are fixed, whereas you can pay unsecured loans quickly by paying more each month. The period is often for a year or two. And the borrower can opt to renew the loan after it has been fully paid off.

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