Yay or nay: 'Payday' loans for financial emergencies

MANILA - Availing a payday loan for financial emergencies may be convenient, but is it a wise move?

A payday loan is an amount of money lent at a high interest rate, on the agreement that it will be repaid when the borrower receives the next paycheck.

To pay for the loan, a borrower has to issue a post-dated check in the amount that he and lender has agreed upon. The lender then holds on to the check and cashes it on the agreed date, which is usually the borrower's next pay day.

Despite its convenience, Fitz Villafuerte, a registered financial planner, warned that payday loans can lead to more problems.

Whereas personal loans happen through credible, regulated financial institutions that are part of the system, getting a payday loan from people you don't know is an unpredictable practice that may leave you in a bad place.

Some lenders also require borrowers to surrender their ATMs, which can lead to problems, like lenders taking more money than what is borrowed from them.

For Villafuerte, if taking out a loan is unavoidable, then it is better to get one from your company or a bank.

"If there's a payday loan offered by the company, I would say that's the better option because at least, automatic deduction na siya sa salary mo. However, if your company does not offer that, then availing of one sa bank is also okay. However, make sure that the reason you're buying money is an emergency," he said.

He also said that building an emergency fund can help save one from living from paycheck to paycheck.

"The best way to really avoid getting a payday loan is to have money saved in the bank specifically for emergencies. It's good that payday loans are available, but make it as the last resort to get money if there is a financial emergency," Villafuerte said.

source: www.abs-cbnnews.com

The Fastest Forms of Loans

Loans aren’t always easy to find. If you need the money quickly, you can’t go to a bank because the application process could take weeks. You can’t go to a building society for the same reason. There are alternatives, though.

Let’s discuss some of the fastest forms of loan.

Payday Loans


Payday loans are always going to be the quickest loans because there are no credit checks involved. All you have to do is tell them how much you need and how long you want to borrow the money for.

The interest rates are high, which is the big downside, but if you need the money within a few hours there’s no faster way to get that money.

There are plenty of payday loans companies around, so do your research and see which one offers you the best deal.

Credit Cards


Credit cards are another easy way to get money fast. If you have a good credit score and own one of the top cards, you can benefit from the ability to borrow a couple thousand dollars with no questions asked. The terms of repayment are generally fairer than payday loans, but your credit score does come into it.

What if you don’t have the score to get one of the better credit cards, though?

There are still options available to you. One option is to take out a credit card for those who have bad credit. You can borrow small amounts of money with no questions asked, which is still a superior option to going to a bank.

Person-to-Person Lending

The final option that would fall under the definition of ‘quick’ is to lend from someone you already know, such as a family member or a friend. The chances are you won’t be able to borrow as much money, and you will have to make a conscious effort to repay on-time, but it’s often the case where you can get money without any interest attached.

Another variation of this is crowdfunding. We wouldn’t recommend this because it does take much longer to get funded, and there are no guarantees you’ll actually get the money, but on the other hand you don’t have to pay the money back.

Conclusion

The best ways to get money fast is to either use your credit card or to take out a loan with a payday loan company. Just make sure you always consider the financial implications of taking out a loan. Ensure you have the means to pay back the money on-time.

source: christianfinanceblog.com