I Need Money Now! Now What?

So, you get paid this Friday, but that money’s already spoken for. Be it membership dues, your electric bill, car insurance, an impromptu car repair or even a house payment, sometimes it just seems like you can’t make it stretch far enough. You begin considering all those television, radio and telephone directory advertisements for things like “payday loans”, “cash advances” and things of the like, also referred to as short term lending.

Before you decide if short term lending is the answer for you, consider the details of short term lending vs. conventional lending.

A conventional loan is handled through a financial institution, such as a credit union or bank. You will be required to provide a detailed budget, outlining your income and all current debts, as well as means of verification of these items (i.e. bank statements, paycheck stubs, W2 forms, utility bills, loan account numbers and banking information etc.). Your credit score is generally essential to the approval process. In return, as long as you make your payments on or before the monthly payment due date, you can improve your current credit score. Conventional loans generally start at a minimum amount of $1000, and the terms can vary from one year to five or more years at generally low interest rates. Once you’ve applied, it can take several weeks before you know if you are approved and funds are dispersed.

But what do you do if you have applied for a conventional loan and were turned down?But what do you do if you have applied for a conventional loan and were turned down? What if you need the money as soon as possible and do not feel comfortable waiting for the several-week process to either approve or decline your application? What if you don’t need to borrow $1000, rather you need a bit less just to get you through until your next payday? These questions, among many others, lead many people to consider a short term loan.

A short term loan (payday advance, cash advance, payday loan etc.) is most often not handled through a traditional banking center (i.e. credit union or bank), rather you apply through a separate company specializing in short term loans to lend you the amount (usually $100-$1500). These companies can be contacted in person at various locations, but many people are finding it much simpler to use the web.

Generally, all that is required is the following:

Current checking account
Confirmation of current employment and income
Valid Identification (Driver’s License, State Issued ID, Social Security Card)
Credit scores are not considered in the approval process however, if you default on your repayment schedule - meaning, if you don't pay back the money you borrowed on or before the due date - it can negatively affect your check cashing abilities elsewhere, as well as your ability to utilize short term lending in the future. The interest rates are usually much higher than those offered by traditional lenders and there may be other required fees you must be aware of, as well. The approval is much faster than that of a conventional loan, ranging from less than one day to one week, with funds being dispersed as quickly as immediately upon approval to the next business day following your approval.

One of the most important things that should be included in your decision is whether or not a company and, in return, your loan is FDIC insured. The Federal Deposit Insurance Corporation (FDIC) insures banks and other financial institutions for at least $100,000 per depositor. For more information on what the FDIC does and why it is important to look for that logo, please read the article, "Who Is The FDIC?"

Both conventional and short term lending have their place in today’s society. Please be sure to educate yourself on your lenders of choice before making a final decision. Some states do not permit short term lending, so be sure your state does before applying for any payday loan. Terms and conditions are included in every lending transaction, and this is where much of the proverbial “fine print” will be located.

Once you have done the research and found the answer that works for you, go into it knowing you've found the necessary tools to be a savvy borrower.