When you run into a financial bind, payday loans are a quick way to get money in as little as 24 hours. These types of loans don’t require good credit or collateral. They are however; much more expensive than traditional which could be a major pitfall.

Experts highly recommend that people stay away from them because of the vicious debt cycle they put customers in. Payday companies however, say to only use them for emergency situations.

Of course, for most consumers it doesn’t work out that way. It can take months to repay a payday loan. In many cases, they have to take out another one just to cover it.

The choice is still yours. If you’re determined to take out a payday loan, at least go with a company that has a pretty good rating. Here is a list of payday lenders ranked according to reputation and overall costs.

  1. Ace Cash Express
  2. Check Into Cash
  3. Cash Central
  4. CashNet USA
  5. Cash 1
  6. Check N Go
  7. Speedy Cash
  8. Cash Store
  9. Pay Day Loan Today

In Part 1 of What Everyone Should Know About Payday Loans, we covered the fact that payday loans aren’t cheap and that they will ensure they get paid first. In Part 2, we will cover other secrets you should be aware of.

  1. State licensed lenders are normally safer: Before taking out a payday loan, you should know that not all lenders are the same. Many lenders found online are unregulated operating outside of the US. When there’s a dispute, this can make it much more difficult to resolve. They have direct access to your checking account. It’s best to go with someone who is regulated in your state because they must follow regulations regarding collections and loan renewals.
  2. These loans are due in full on your next payday: Many borrowers are so relieved to get the money, they don’t always understand the repayment terms. Payday loans are due in full on pay day. This means a $400 advance with $30 in fees per $100 today will make your paycheck $520 lighter come payday. This is a lot of money when you have other living expenses to cover.

Payday loans are quick and easy loans that don’t require a credit check or collateral. In many cases, they will deposit the money into your account within 24 hours. This can feel like a sweet deal to someone who is in a financial bind. But, there are things everyone should be aware of when it comes to these types of lenders.

  1. These loans are not cheap: Before taking out a loan, you should be aware of what you’re getting yourself into. There is usually an expensive flat fee, plus other fees ranging from $15 to $45. This is more expensive than credit cards.
  2. Don’t be sticker shocked on payday: The way these loans are set up, they ensure that they get their money first. That’s why you must give them access to your checking account so that the moment your paycheck comes, they can immediately withdraw fees and the principal.

Payday loans should only be used if an emergency has come up.

Check out Part 2 for more information.

When an emergency comes up, payday loans are quick and easy loans that can cover you fast. They don’t require a credit check or collateral and in many cases, they will deposit money into your account within 24 hours.

What’s the drawback? You have to be comfortable giving them direct access to your account and forfeiting a huge chunk of your paycheck on pay day. For that reason, you should be aware whether you’re using it for a good reason or not.

First, ask yourself how often you’re taking them out and for what reason. Since they should only be used for emergencies, you shouldn’t be taking them out very often.  You should not take out a payday loan more than twice per year. If you’re using it more often than that then you’re probably taking out too many.  

Many people start using it as an extension of their paycheck or to cover a payment that their pay check missed. That’s incorrect usage. Payday loans are not designed to live on. They are for emergencies.

Have you ever wondered what a direct payday loan lender is? These lenders are the companies who actually make the payday loans. Direct Payday Loan Lenders generally….

  • Market the loan. This means they find people who want to get the loan and qualify for it.
  • Underwrite it. Decide whether they want to give the person the loan or not.
  • Fund it. Are able to give the loan to the person.
  • Collection. Are able to take payments out of the person’s checking account when it comes due.

This is important to note because there are some companies who aren’t the direct lender. These companies do part of what’s listed above such as marketing. Some are only there to gather to person’s application information. These are network companies and usually they work with multiple lenders. With direct payday loans you can apply directly through their company for a loan.

Have you ever heard of salary loans? Salary loans are similar to payday loans except the fees are much lower and they are done at your local bank. You usually can only borrow up to $500, although there are some cases where you may be able to borrow more. Here are some advantages to taking out these kinds of loans.

  • Lower interest rates – The interest rates on these loans are much more manageable than pay day loans.
  • Lending standards – Lending standards are making it easier to borrow money even if you have poor credit or no credit at all.
  • Build credit – If done correctly, you may be able to build your credit score with these loans.  

Word of caution…only take out these loans for emergencies. The payments are due right away meaning there is a possibility that you’ll run short on cash until your next paycheck.

If you need to borrow money fast, you may be tempted to take out a payday loan. But before you take out a payday loan there is another option you should be aware of called salary loans. Salary loans are a rather new product that can be taken out at either your bank or credit union. Not all financial institutions offer it, but if they do you’ll at least have to have direct deposit in order to get approved.

So, what is the biggest difference between the two products? Salary loans aren’t cheap, but the fees are much lower than payday loan fees. It’s also less risky for the bank because they can easily collect fees from you through direct deposit.

These loans have to be paid off more quickly, which can be a financial burden. The good news is, you may be able to negotiate installment payments that will allow you to still get by until your next paycheck.

If you need to borrow some quick money fast, you may be tempted to take out a payday loan or installment loan. But, there is another option out there that you can try that is rather new. It’s called salary advance loan. This is an alternative offered by many banks and credit unions.

Salary loans are small and short term. The most you may be able to borrow is $500. The first step to qualifying is having direct deposit set up at your bank. This ensures easy collection of funds. Here are some of the terms and conditions:

  • You may have to pay back by your next paycheck.
  • If you can’t pay back in that amount of time, you need to break payments into smaller regular chunks.
  • Regardless of which option you go for, you have to have it paid back within ninety days.

Consider trying your local bank or credit union to see if they offer a product like this. It may be a much better option than pay day loans.

If you had to choose between the two lesser evils: payday loans or installment loans, installment loans may be a better option. But when you need to borrow money, you will find the best deals on interest rates and fees elsewhere. Here are three better options to try.

  • Your local bank: Banks will charge a much more fair interest rate and keep the fees reasonable.
  • Credit card: A credit card is often a better option than using one of the installment type loans. Just like with local banks, your interest rates are much more reasonable.
  • Salary advance loan: Some local banks may offer this option. Ask your bank for more details.

These options may be tough if you have poor credit, but they are better than companies that offer installment loans and payday loans.

Maybe you know the dangers of payday loans and have decided to stay away from them. Maybe you were denied a payday loan and are looking for other alternatives. Whatever the reason is you’re not getting a payday loan, consider it to be for your ultimate benefit.

It’s important however, to be cautious of another option on the table called installment loans. One of the dangers of these types of loans is that they can create a vicious cycle of debt. One loan leads to taking out another one. Before you know it, you’re unable to pay for basic necessities. Here are two reasons why installment loans are so costly:

  • Interest rates: The interest rates are expensive. More expensive than credit cards.
  • Origination fees: These fees are usually much higher than traditional loans.

When you end up paying a lot of money to borrow money, you have less to spend on the things you need in the future.