We plan, we save…and then life happens. The reasons people find themselves needing quick cash are as varied as the people themselves. Maybe the car suddenly needs a new transmission or someone gets injured in an accident or catches the flu and needs to cover doctors and medicines. Sometimes urgent care clinics may not be on a particular insurance plan or only on a reimbursement basis. Fortunately, there are ways to bridge the gap between what one has and what one needs.
PAYDAY LOANS
Every so often, a person might find themselves in a place where they need funds in a hurry and figure it’s a short-term crisis. They just need to cover themselves between paychecks, hence the term “payday loan.”
The typical process for getting this kind of loan involves going to the lender (either online or at a brick-and-mortar store) then providing the lender with some personal information and either a postdated check or bank account debit authorization. Before the loan is made, the lender will advise the person of the repayment amount due. The principal plus the service fees. Then, on or before the agreed upon date, the borrower has three options:
- Pay off the balance in cash
- Allow the check or debit authorization to be submitted to the bank
- Pay only the service fees and roll the loan over while agreeing to a new service fee
The advantages here are the quick access to the money and minimal, if any, credit checks. The downside is, it can become easy to get trapped in a cycle of paying off just the fees and rolling the loan. If one’s cashflow remains a problem the idea of paying a smaller amount this week and next week instead of paying the full amount this week can be attractive.
PERSONAL INSTALLMENT LOANS
Also known as a signature loan, this type of transaction generally requires no security to obtain the funds. There are a couple of routes to go here, such as:
Traditional Sources—Many banks, S&Ls and credit unions offer their customers this sort of loan. After all, the way they make money is to take what Customer A has deposited and let Customer B borrow it. Customer B then repays the loan with interest. Here, the advantage is dealing with a Federally regulated entity. However, credit checks or minimum balances in something like a CD or 401k may be an impediment.
Payday Loan Alternative Sources—It may come as a surprise to some, but another alternative is available. One of them I came across is called MaxLend. Companies like this are owned and operated by sovereign Native American Tribes. Being sovereign Tribal entities they are free to set up their own criteria on how, and to whom, they lend money. The advantages are looser credit guidelines and quick access to the money. The disadvantages can include high interest rates and a waiver of rights to remedy in American courts in the event of a dispute.
PAWN SHOPS
If someone owns something it has monetary value. Maybe a little, maybe a lot, but almost certainly something. If it’s owned it can be sold or used as collateral for a loan (i.e. pawned). Jewelry, coins, stamps and artworks are commonly pawned items. One takes the item to a dealer who then appraises it and offers a percentage of that value as the loan amount. The borrower then has a set period of time to pay off the loan and any service fees to retake possession of the item. If the borrower fails to redeem the security, the dealer takes possession and is free to sell the item to recoup their losses.
An offshoot of the idea of pawning something is the automobile title loan. In this case, if a person owns their car free and clear, they may take it to a title loan store and borrow against it. The company then puts a value on the car, often by using the Kelley Blue Book, the industry standard for automobile valuations. The loan amount is determined and the company files a lien on the cars title.
Advantages: No credit nor income issues to deal with. Disadvantage: The potential to forfeit the item pawned and the same cycle of paying fees only as with the payday loans.
Being strapped for cash is never a good feeling. However, it is good to know that options exist than can help smooth out the rough patches.
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