Financial troubles often come without warning at the worst possible time. On these occasions, lucky is the person who has family and friends who can help. Then there are the times when neither family nor friends are in a position to extend any help.
Banks and payday loan lenders often become the recourse of most individuals who are in dire need of financial assistance. Which one is the better option though? These financial institutions are in the business of making money so someone in a bit of a financial jam might have a touch of trouble acquiring a loan.
Banks have several loan options available. The options will depend on what kind of loan you require and whether or not you are eligible.
There are a few loan options where you do not have to provide collateral. These are called unsecured personal loans. With these kinds of loans, you can borrow up to a certain amount without providing any security for the bank.
If you are to apply for an unsecured personal loan, you need stellar credit history and a good relationship with the bank. If your credit history is less than stellar, you may be unable to get approval for a no collateral personal loan. However, you may still be able to get one if you are known to the bank to be a good customer.
Payday loan lenders are another matter. These companies are often viewed with contempt and derision by other financial institutions. This is because payday loan companies are thought of as predators taking advantage of down on their luck individuals.
A payday loan lender is easier to approach. Their requirements are also easier to fulfill. One doesn¬'t even have to go the company¬'s office to fill in papers. Paperwork, what little of it is required, can be sent online or through fax.
The speed and ease of processing the loan is one advantage that payday loan lenders have over banks. However, this comes at a pretty hefty cost. While payday advances are relatively easy to get, the whopping interest rates can put off a less desperate person.
Payday loan companies may charge up to 650% Annual Percentage Rate or APR. These rates differ from company to company and state to state depending on the existing laws and regulations.
Some states have very strict rules regarding payday lending. Some states have regulations that border on nil. Some states have banned payday lending entirely.
While there are laws in place that are meant to protect hapless consumers, there are still many loopholes that paycheck advance companies can use to their advantage. These loopholes can make getting out of debt very difficult for consumers who are already hard up.
If you are able to provide the documentation required by a bank, go for a bank loan instead of a payday advance. If getting an unsecured loan is difficult, go for a secured loan instead. If you can borrow on a short term basis from a family member or a close friend, that might be the better option for you. Most family members and friends would be loath to charge you interest on a small, short term loan. You may also ask the company you work for if you can secure an advance on your paycheck. If the company agrees, you will receive less on your next paycheck but will have survived the immediate financial crisis.
Banks and payday loan lenders are not the only financial institutions who can help you out. Explore other options before deciding on a loan. Especially if it¬'s a payday loan.
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