My Personal Finance Blog

If you are short on cash and need an emergency loan to pay off a bill, you are likely to need an online payday loan.

Online payday loans are generally for someone who has low credit and is living paycheck to paycheck. Then an emergency comes up, their kid is sick or their car needs emergency repairs, or a bill comes up and it cannot wait until payday to get paid. So, why on earth would someone need to worry about taking out an online payday loan?

What is a payday loan?

These online loans are too readily available for quick cash. All a person needs is proof of employment, usually a few paycheck stubs, your boss’s phone number, and two forms of identification. That’s it. Normally your credit score doesn’t even come into play.

The money is made available to you usually in 24 hours or less and is deposited directly into your checking account. Sounds easy right? Online payday loans usually come with enormous fees and potentially dangerous risks. Here is what you can look for to keep yourself safe and your identity in the clear.

The Dangers of Online Payday Loans

The biggest danger is you. If you loose your job before payday, or your paycheck is not large enough to cover the “up to 60% fees” you could be owing money to the online payday loan creditor AND your banking institution. Associated fees, percentage rates, and payback percentages are big money making business for these companies.

How do you think they can afford to take such a risk? Of course, the payout has to be great for them to take it. Other dangers may be hidden fees not covered by your next pay day or initially only covered in the fine print you might not have read. Even more surprising is if your check is a day late and the creditor takes the money out of your now empty banking account. You wind up paying both institutions and up to double the original payback amount.

Other dangers aside from hidden fees could be identity theft, if the online pay day loan company is not FDIC (www.fdic.gov) insured and backed by a national institution.

The simple fact that they have access to your bank account to withdraw funds is heart pounding scary enough in today’s insecure world. Simple clerical errors are made everyday; they could accidentally take the money from your bank on the wrong day or for the wrong amount and this might not be in your favor. You could wind up with a huge mess on your hands and in your wallet.

You need to do a little research about your chosen online payday lender well in advance of the emergency. And you need to make sure that this is in fact, a real desperate emergency.

Making online payday loans a habit can lead to larger and larger fees each time and destroy your credit entirely. They are not a quick fix, not a long term solution to a money shortage, and they can quickly leave you completely shortchanged and even more desperate than before.

Finding a Reputable Company

As stated before, research lenders well in advance of your need and have one or two in mind before the crises hits. Make sure this is a real emergency and not something that can be postponed by a quick phone call or a couple days wait.

Next look into the bank backing your lender, read the fine print and all updated material before signing anything. Make sure that the chosen lender is who they say they are and not a fly-by-night-company or a look-a-like fraud. If possible, ask around for other people’s opinions from among your friends or co-workers.

It is not strange to find a person with stacks and stacks of credit cards – all these are active, mind you. This is because there are a lot of credit card companies nowadays that make it easy to own credit cards. They also make it really attractive with added perks as rewards points and mileage credits. You can even have multiple credit card types from the same issuer. In the coming days, you might even find a package with a pre-approved credit card in your mailbox. Your stack might also include ATM cards and debit cards from several of your bank accounts. These accounts may or may not have been opened in connection with your credit card accounts. Or, maybe some of your plastic cards were issued to you because you have an account with the issuing institution. Is it advisable to have lots of accounts and credit cards?

In as far as bank accounts, it really does not make sense to keep several of the same types of account. Financial managers would advice that you open one account for your revolving fund, another one for your emergency fund, and probably a couple of others for your long-term funds. Your revolving fund could be your simple ATM account or your checking account. There are some banks that offer both conveniences in one account. This is your transactional account – some would call it your wallet account. Your emergency fund could be kept in a time deposit or a special savings instrument with a tenor that you are comfortable with and that earns interest that is a bit higher than your savings account.

For your long-term funds, you can consider higher-yielding instruments like fixed tenured special high rate offers that your bank could offer from time to time. You need not keep all your accounts in one institution. In fact, it could be dangerous to keep all your eggs in one basket as they popular adage goes. Having about three to five accounts with different banks in total would be just right provided that these are different types of accounts. It would be a nightmare to monitor and balance five checking accounts.

Now, credit cards are a different matter. There really is no cap as to how many charge cards you should own. Heck, some credit card companies can give you a new one even if you do not have a good credit score. But then again, you should be wise about owning and using them. If your credit record is clean thus far, there really is no reason why you should start acting irresponsibly and start smearing it. Having a lot of plastic cards do not automatically give you license to go on a wanton spending spree. You can actually use multiple plastic cards to your convenience.

Being able to manage spending on several cards and making payments on them as they fall due can do wonders for your credit record. The number of cards you own does not matter as much as the amount of outstanding unpaid balance you have on all of them. While one or two cards is really all that you need, it really does not matter much how many bank accounts and plastic cards should you have for as long as you are able to manage all of them well enough not to put you on the negative side of your personal financial statement.

It is best to remember that these financial instruments are supposed to help you manage your money. You should not end up losing money in the long run. Prudent use of these tools will allow you to save more of the money that you earn and earn more from the money that you save.

So, in the end, how many bank accounts and plastic cards should you have? Only as much as you could handle properly!

Here are just three of the many “tips” for retirement planning in 2011. Of course, there are many more, but they all pretty much center around these three in one way or another. After you go through the tips, we’ll get to the truth.

Save Regularly. Make saving for retirement a habit. The best way is to set up automatic deductions from your payroll or your checking account into deposits in mutual funds, IRAs, or other forms of investment. “Pay your-self first” is an adage observed by many financially successful people. An automatic savings plan is the best way to accomplish this, and it is very easy to set up.

Diversify Your Investments. Not only should you diversify within each category of your investment portfolio, such as mutual funds, index funds, and various other investment products, but you can also reduce risk by investing among different categories of investments. Put some of your money in cash, some in bonds, some in stocks, and some in other forms of investment. The factors that can cause one category of investment to do poorly may cause another to do well.

Live Within Your Means. Outline a retirement budget so that you will have a realistic idea of how much income you will need to live out your retirement years. Learn to live on a pay-as-you-go basis and avoid misuse of credit cards. High debt will make it tough to save for retirement. All the money that goes to pay interest, late fees, and old bills is money that could be going into your savings or investment accounts. Learn to handle your credit cards wisely – pay off the card each month, or at least pay more than the minimum. Most importantly, NEVER dip into retirement savings. When you look back at that brand new “whatever” that you thought you just couldn’t live without, you will be glad that you didn’t sacrifice your retirement income by spending irrationally on something that most likely would have turned out to be a disappointment anyway.

The TRUTH: the truth is that according to the majority of polls and statistics, most Americans, literally cannot afford to follow any of these three tips. Life’s “overhead” alone – rent or mortgage payments and property taxes; income taxes, local, state, and federal “fees”; automobile registration fees, insurance premiums, tuition, home and auto repair bills; student loans, alimony and child support (50% divorce rate), and all the other mandatory expenditures – eats up most of every American’s paycheck.

If that were not true, credit card debt, credit card delinquencies, and personal bankruptcies would not be at the highest rate in history, while savings is at an all time low. According to the Federal Reserve’s G.19 report, March 2010, average credit card debt per household with credit card debt is $16,007, and about 56 percent of consumers carried an unpaid balance in the past 12 months. Average total debt in 2009 (including credit cards, mortgage, home equity, student loans and more) for U.S. households with credit card debt is $54,000.

Obviously, the real truth is that the average American is obligated to first pay the overhead, and then pay back the borrowed money, and then save and invest. A feat that, without some new, additional source of income, is impractical, if not impossible.

The best “tip” for most Americans is to find a way to earn more money. Necessity has always been the mother of invention, and the solution to that problem has come about with the ever-expanding global internet market. Because the Internet offers opportunities that never existed before, starting and growing a business has never been as accessible to as many people as it is today. Internet entrepreneurs are finding that they can not only increase their income, they can actually produce enough extra income to pay off their debts, and begin to save and invest.

The first rule when applying for banking and credit services is to always read the fine print and to understand all of it. Read up, take it home, and analyze it, ask the banking manager questions. The fine print is there for a reason. The charges and requirements contained in there, will affect the savings or added expenses you incur, whenever you bank or use credit.

Checking Account

You can generate savings of more than $100.00 a year, when you select a checking account with a low or no minimum required balance. Request a list of the fees that are applicable to your account and compare with other checking account offers. Read the fine print. See if you qualify for the conditions and stipulations, the bank requires.

Savings account

Prior to opening a savings or investment account with the bank of your choice, ask the bank and check to see that the account is insured by the federal government (FDIC or NCUA). Otherwise, you will assume 100% of the risk; you may end up risking more rather than saving.

Certificates of deposit or treasury bills or notes. These certificates and notes are accurately called forced savings. They earn above average but only after, they’ve reached a maturity period. If you withdraw before the due date, you’ll incur penalties. This is a competent way to generate savings from funds you have no immediate need for.

Once you’ve selected the type of savings or investment products, compare the rates and fees offered by different institutions. These rates can vary a lot and, over time, can significantly affect interest earnings.

Credit Cards

You’ll generate more savings by researching on credit cards. Or you can call a research credit firm that will for a modest fee; send you a list of low-rate credit cards. Use the list to compare the features of each of these credit card companies, according to their interest rates and billing cycles. Is it a 28 day billing cycle, or a monthly one? What are the freebies? Such as Cash back or airline miles offers. Will you use these? You could be paying for these in the form of higher interest rates.

If you have a credit card, practice the habit of paying off your entire bill at months’ end. You generate savings by not paying late payment or over-the-credit-limit fees, which will add up to bigger charges.

If you have a lot of credit cards, consider using only one or two credit cards.

In the long run, your research on banking and credit services, will pay you back well in terms of consistent savings.

A loan is a fast and easy way for an individual to have a sufficient amount of money to help tide them over until they receive their next paycheck should they not have the funds to do so otherwise. There are payday loans that can be applied for wherever loan companies are located but with the convenience that the internet offers, online payday loans are also now more viable than ever. Applying for quick loans, whether through the internet or through more conventional means, is actually quite simple and can be done so with a shorter approval time than is usually experienced elsewhere.

Loan companies that offer online loans can be easily searched through any search engine. The number of results may be quite extensive so it is important to review those that seem viable in order to make sure that these loan companies are indeed legitimate. One way to do is to see if they are indeed registered lenders or not since there are quite a few which do not have the required authorization to actually practice their trade. A check with a state’s Department of Financial Institutions can provide the information that will confirm whether or not a lender can really offer quick payday loans.

Because quick payday loans usually require some sort of proof of income, conventional payday lenders request for a paystub to show that the individual is currently employed. The loaner is also asked to provide a postdated check with the exact amount of the loan plus the interest that will be charged. This is a guarantee of sorts for the lender who can simply cash the check in when the deadline for payment has been reached. For online payday loans, proof of income can be submitted through fax but there are lenders who no longer require any sort of documentation as a prerequisite for loan approval.

The most common thing that is required of applicants for quick payday loans is that they have their own checking account. This allows the payday lender to easily deposit the amount that is being borrowed into the loaner’s account. In turn, the lender can then withdraw the amount owed as well as the incurred interest once the deadline has been reached. If repayment for online payday loans cannot be made in time, loaners need to get in touch with their lender as soon as possible in order to find out what their options are. Penalty fees may then be added to the total amount owed.