Connect with us

News

What Are Payday Loans?

Published

on

What are payday loans? You know those “get cash fast” places you hear about? Those are payday loan lenders — and they are not your friend. Payday lending depends on desperate people with few other options to keep their doors open.

One email a day could help you save thousands

Tips and tricks from the experts delivered straight to your inbox that could help you save thousands of dollars. Sign up now for free access to our Personal Finance Boot Camp.

By submitting your email address, you consent to us sending you money tips along with products and services that we think might interest you. You can unsubscribe at any time.
Please read our Privacy Statement and Terms & Conditions.

How they work

Let’s say your car breaks down on the side of the road or your electricity has been shut off due to nonpayment. You have no money in the bank, and your credit score is low. A payday lender might seem like a good idea. After all, they require no credit check and promise to get you the money you need fast.

According to a personal loan study by The Ascent, you could end up paying 400% or more in interest due to the way payday loans are designed. (Interest rates as of 2019 ranged from 154% to 677%.) The average interest rate on a credit card is 16.16% according to the CreditCards.com Weekly Credit Card Rate Report. And, at the time of this writing, the annual percentage rate (or APR) on the best personal loans for bad credit caps out around 35.99%. Given those statistics, charging more than 400% is the act of a predatory lender.

Part of the problem is this: In 2019, 33 states still allowed payday loans. (Some other states have put an end to these predatory lending practices.) Not one of the 33 states that still lets payday lenders operate limits the amount of interest charged.

How they keep you hooked

Whether you visit a payday lender’s physical location or take out an online payday loan, lenders make it easy. All they require is proof of identification, proof of your gross monthly income, and a postdated check. You tell them how much you want to borrow, and they instruct you to write a check for the amount you borrowed, plus fees. They have you postdate the check by two weeks.

If you can’t pay the loan back in full by the due date (and the average payday borrower can’t), you owe them the original amount you borrowed, any fees they tacked onto the loan, and the interest accumulated in those two weeks. Let’s say you originally took out a small loan of $500. Two weeks later, you could owe $600 or more.

Hey, that’s okay — at least according to the payday loan lender. They’ll give you another loan to pay off the first loan. Now, you’ll need to borrow the $600 (or more) you owe on the original loan and another round of loan fees. Between the principal, fees, and finance charge, you’ll likely end up owing $700 or more two weeks later.

Payday lenders are not naïve. They know that you have other financial obligations. It’s in their best interest if you keep borrowing to pay off previous loans. When you finally pay the debt in full, they end up with more money due to excessive fees and interest. Even small dollar loans can end up being very expensive.

A way out

We can’t tell you about payday loans without suggesting other ways to find money when you’re in a pinch.

Consider a cash advance

If you have a credit card, a cash advance loan may be the answer. Cash advances typically carry a higher interest rate than regular credit card purchases, so we wouldn’t normally suggest you take one out. However, when the choice is between a cash advance with an APR of 30% or a payday loan with an APR of 400% or more, a cash advance is the clear winner. Most cash advances come with fees and begin to accrue interest immediately, so make it a point to pay it off as quickly as possible.

Turn to friends and family

If you need only enough to get you through until your next payday, help from a friend or family member might be the ticket. Before you borrow, though, make sure you can repay the loan as promised. There are few things worse than leaving someone else in the lurch because you couldn’t uphold your end of the deal.

Check charitable organizations

Let’s say you paid to repair your car but now don’t have money to feed your family. A number of organizations offer services to help. There’s aid available for just about everything — from groceries to utility bills to transportation. Need Help Paying Bills offers a long list of organizations, who they help, and how to contact them.

Apply for a bad credit loan

As mentioned, borrowers with poor credit scores may still qualify for a personal loan for bad credit. Your interest rate is likely to be high, but it’s better than paying 400% interest.

Taking out an installment loan like this offers several advantages:

  • You’ll know exactly how much your monthly payment will be and when the loan will be paid in full.
  • You can “set it and forget it” by scheduling automatic monthly payments from your bank account.
  • If you want to pay the loan off quickly, you can choose a short loan term.
  • Personal loans are available from local banks, credit unions, and online lenders.
  • You can avoid a predatory high interest rate.
  • As long as you stick to the repayment plan, your credit score is likely to go up.

In short, trying one of these options instead of becoming a victim of predatory payday loans is good for your bottom line.

Source link

Continue Reading

News

Are Sallie Mae Student Loans Federal or Private?

Published

on

When you hear the name Sallie Mae, you probably think of student loans. There’s a good reason for that; Sallie Mae has a long history, during which time it has provided both federal and private student loans.

However, as of 2014, all of Sallie Mae’s student loans are private, and its federal loans have been sold to another servicer. Here’s what to know if you have a Sallie Mae loan or are considering taking one out.

What is Sallie Mae?

Sallie Mae is a company that currently offers private student loans. But it has taken a few forms over the years.

In 1972, Congress first created the Student Loan Marketing Association (SLMA) as a private, for-profit corporation. Congress gave SLMA, commonly called “Sallie Mae,” the status of a government-sponsored enterprise (GSE) to support the company in its mission to provide stability and liquidity to the student loan market as a warehouse for student loans.

However, in 2004, the structure and purpose of the company began to change. SLMA dissolved in late December of that year, and the SLM Corporation, or “Sallie Mae,” was formed in its place as a fully private-sector company without GSE status.

In 2014, the company underwent another big adjustment when Sallie Mae split to form Navient and Sallie Mae. Navient is a federal student loan servicer that manages existing student loan accounts. Meanwhile, Sallie Mae continues to offer private student loans and other financial products to consumers. If you took out a student loan with Sallie Mae prior to 2014, there’s a chance that it was a federal student loan under the now-defunct Federal Family Education Loan Program (FFELP).

At present, Sallie Mae owns 1.4 percent of student loans in the United States. In addition to private student loans, the bank also offers credit cards, personal loans and savings accounts to its customers, many of whom are college students.

What is the difference between private and federal student loans?

When you’re seeking financing to pay for college, you’ll have a big choice to make: federal versus private student loans. Both types of loans offer some benefits and drawbacks.

Federal student loans are educational loans that come from the U.S. government. Under the William D. Ford Federal Direct Loan Program, there are four types of federal student loans available to qualified borrowers.

With federal student loans, you typically do not need a co-signer or even a credit check. The loans also come with numerous benefits, such as the ability to adjust your repayment plan based on your income. You may also be able to pause payments with a forbearance or deferment and perhaps even qualify for some level of student loan forgiveness.

On the negative side, most federal student loans feature borrowing limits, so you might need to find supplemental funding or scholarships if your educational costs exceed federal loan maximums.

Private student loans are educational loans you can access from private lenders, such as banks, credit unions and online lenders. On the plus side, private student loans often feature higher loan amounts than you can access through federal funding. And if you or your co-signer has excellent credit, you may be able to secure a competitive interest rate as well.

As for drawbacks, private student loans don’t offer the valuable benefits that federal student borrowers can enjoy. You may also face higher interest rates or have a harder time qualifying for financing if you have bad credit.

Are Sallie Mae loans better than federal student loans?

In general, federal loans are the best first choice for student borrowers. Federal student loans offer numerous benefits that private loans do not. You’ll generally want to complete the Free Application for Federal Student Aid (FAFSA) and review federal funding options before applying for any type of private student loan — Sallie Mae loans included.

However, private student loans, like those offered by Sallie Mae, do have their place. In some cases, federal student aid, grants, scholarships, work-study programs and savings might not be enough to cover educational expenses. In these situations, private student loans may provide you with another way to pay for college.

If you do need to take out private student loans, Sallie Mae is a lender worth considering. It offers loans for a variety of needs, including undergrad, MBA school, medical school, dental school and law school. Its loans also feature 100 percent coverage, so you can find funding for all of your certified school expenses.

With that said, it’s always best to compare a few lenders before committing. All lenders evaluate income and credit score differently, so it’s possible that another lender could give you lower interest rates or more favorable terms.

The bottom line

Sallie Mae may be a good choice if you’re in the market for private student loans and other financial products. Just be sure to do your research upfront, as you should before you take out any form of financing. Comparing multiple offers always gives you the best chance of saving money.

Learn more:

Source link

Continue Reading

News

Tips to do some fall cleaning on your finances

Published

on

Wealth manager, Harry Abrahamsen, has five simple ways to stay on top of the big financial picture.

PORTLAND, Maine — Keeping track of our financial stability is something we can all do, whether we have IRAs or 401ks or just a checking account. Harry J. Abrahamsen is the Founder of Abrahamsen Financial Group. He works with clients to create and grow their own wealth. Abrahamsen shares five financial tips, starting with knowing what you have. 

1. Analyze Your Finances Quarterly or Biannually

You want to make sure that your long-term strategy is congruent with your short-term strategy. If the short-term is not working out, you may need to adjust what you are doing to make sure your outcome produces the desired results you are looking to accomplish. It is just like setting sail on a voyage across the Atlantic Ocean. You know where you want to go and plot your course, but there are many factors that need to be considered to actually get you across and across safely. Your finances behave the exact same way. Check your current situation and make sure you are taking into consideration all of the various wealth-eroding factors that can take you completely off course.

With interest rates very low, now might be a good time to consider refinancing student loans or mortgages, or consolidating credit card debt. However, do so only if you need to or if you can create a positive cash flow. To ensure that you are saving the most by doing so, you must look at current payments, excluding taxes and insurance costs. This way you can do an apples-to-apples comparison.

The most important things to look for when reviewing your credit report is accuracy. Make sure the reporting agencies are reporting things actuary. If it doesn’t appear to be reporting correct and accurate information, you should consult with a reputable credit repair company to help you fix the incorrect information.

4. Savings and Retirement Accounts

The most important thing to consider when reviewing your savings and retirement accounts is to make sure the strategies match your short-term and long-term investment objectives. All too often people end up making decisions one at a time, at different times in their lives, with different people, under different circumstances. Having a sound strategy in place will allow you to view your finances with a macro-economic lens vs a micro-economic view. Stay the course and adjust accordingly from a risk and tax standpoint.

RELATED: Financial lessons learned through the pandemic

A great tip for lowering utility bills or car insurance premiums: Simply ask! There may be things you are not aware of that could save you hundreds of dollars every month. You just need to call all of the companies that you do business with to find out about cost-cutting strategies. 

RELATED: Overcome your fear of finances

To learn more about Abrahamsen Financial, click here

Source link

Continue Reading

News

How to Get a Loan Even with Bad Credit

Published

on

Sana pwedeng mabura ang bad credit history as quickly and easily as paying off your utility bills, ‘no? Unfortunately, it takes time. And bago mo pa maayos ang bad credit mo, more often than not, kailangan mo na namang mag-avail ng panibagong loan. 

Good thing you can still get a loan even with bad credit, kahit na medyo limited ang options. How do you get a loan if you have bad credit? Alamin sa short guide na ito. 

For more finance tips, visit Moneymax.

 

 

Source link

Continue Reading

Trending