Many people seek loans during the holiday season. There are many alternatives to allow us get funds during this period, such as tapping our home equity, pledging our paycheck or simply pawning our huge TV set. Regardless of what methods we choose, we should be particularly careful. Many people are facing financial problems after the holiday season ends. Payday loans or deferred deposit service are issued against our next paycheck. It is actually a suitable solution for people who seek short term, small loans, less than $500. To obtain payday loans, we could write the post-dated check and the amount desired.
The typical payday loan is about two weeks and lenders will be able to deposit the check. In this case, the lender will cash the check if we don’t show up with the money. It is possible for us to ask the lender to hold the loan for one more pay period and it means we will need to pay additional fees and interest. This loan can create a costly and vicious cycle, if we further extend the loan. The annual interest can reach more than 500 percent if postpone the payment for 12 months. Payday loans can actually get us hooked and it could be difficult to stop. In fact, many people rely on payday checks to cover their daily needs.
In this case, they actually live a one month of loan after another. Laws associated to payday lending could vary from state to state. There are restrictive laws that regulate this kind of loan and some cases, it is actually better to stay at home during the holiday season, than applying for payday loan. Payday loans are actually predatory by deign and they lifeblood of this business is repeat borrowers. Payday lenders are servicing millions of customers and many of them are households. It is quite possible that we would have a new dependence on payday loan after the holiday season ends.
Another type of loan that we may need to be careful with is pawnshop loan. It is secured by a piece of property or item with one to four months terms. Interest rates are different depending on the states and type of collateral, from 2 percent to 10 percent per month. There’s usually a grace period to provide us with additional time repay our loan. If the loan isn’t paid off in the specified period, the pawnshop will take possession of the collateral. Pawn loans are also suitable for people planning to spend the holiday season, since it provides emergency cash. It should be noted that the amount of cash provided can be half or lower the actual value of the item.
Loans secured by our car’s title could be one thing that we may need to avoid. The title loans are usually much lower than the actual value of the car. In this case, lenders can acquire our car if we fail to make payments on the agreed date. It should be noted that title loans can be considered a legalized car theft and we may need to avoid it.