• What is Debt Consolidation?
  Learn how debt consolidation works to reduce interest rates and save money.
• What Can Be Consolidated?
  Types of high-interest debts commonly used.
• What is Debt Settlement?
  Often confused with, but significantly different than consolidating.
• What Debts Can Be Settled?
  Learn what kind of creditors that will often settle for less.
• How Do Bankruptcies Work?
  How Chapter 7 and Chapter 13 bankruptcies work, and the aftermath on your credit report.

• Budgeting Tips
• Working With Credit Reports
• More Articles & Information
• More Finance Sites

Payday Loans

Why do people get payday loans?
People who use these type of loans usually have explored all other viable options and are in desperate need for cash. Most payday places don't do credit checks - so those with bad credit can get this type of loan withthout jumping through hoops.

How do payday loans work?
Once you fill out an application and give the lender certain documents like photo ID and a pay cheque stub, you sign a loan agreement and make a postdated cheque for the total sum you're required to pay, which includes the loan plus all interest/fee payments. Then, you get your cash. The postdated check is held onto until the loan payment due date, which is normally one or two weeks afterwards. The loan company subsequently deposits your check (unless you have replaced the check or have already paid off the loan).

What are the requirements to get a payday loan?
These are probably the easiest loans to get, the requirements are minimal and traditionally involve:

• That you're presently employed or have a regular income.
• That you are of legal age - usually 18 years of age.
• You have a current bank account that has been in existence for at least three months.
• Your account indicates a monthly deposit of at least $1,000 from your payroll, or $800 for people on a fixed income.
• You shouldn’t have any outstanding payday loans.

• Photo ID, like a driver's license or any other kind of government-issued ID.
• A recent copy of a bank statement, usually no more than 30 days old.
• A personal check marked "VOID".
• A copy of your most current pay stub.

What is the cost of a payday loan?
Here is the catch, these kinds of loans while easy to get are usually really costly. Payday loan businesses give the borrower the sum of the check minus their portion (They get their money up front). Fees (sometimes known as finance charges) are usually around 20% of your cash advance amount. The annual percentage rate for payday loans can vary anywhere from 200 to 1300 percent.

The vital thing to consider is your capacity to pay back the loan, since if you're low on cash this pay period, consider whether you will be short of money next pay period. Remember that you have to use your next pay cheque to repay your loan. Certain people discover that after they start with one payday loan, they wind up having to borrow money in their next pay period to pay it back and go on to repeat the borrowing cycle over and over. This trend will end up costing you thousands so do what you can to avoid these loans altogether.

Payday loans are similar to any other form of debt but they are high risk loans. If a borrower finds that he/she is unable to repay the loan, the loan company can seek financial compensation for the face amount of the check plus court costs and late charges (assuming they were disclosed in the loan contract) and also NSF fees. Once a judgment is obtained, the lender could resort to making use of a collection agency or attempt to garnish your wages.

Many payday loan lenders also record past due accounts with the credit bureau and this may harm your ability to acquire credit in the future.