Farley 1 Doug Farley Evaluation Writing 2010 Ron Christiansen Evaluation Have you ever been in a tight spot with cash? Do you have bad credit and need money fast? Your last resort might be to get a loan from a quick loan business, but are these places really as helpful as they seem?
(http://www.nationalmoneystore.com/)
When you look at a quick loan ad, website, or TV commercial a loan seems so simple to get. Most of the time you read testimonials of others that have used the company’s loans. Every testimonial they use to advertise only include positive comments they never include information about interest, base fees, and extension information. It’s a smart advertising technique but it tricks its consumers. Especially with their tunes they come up with for example “You know where to go, Quick Loans.” They have these dumb little tunes that stick in your head and when you are in a bind you have that in mind and you know where to go.
Farley 2 Now, what exactly are quick loans? They are small short-term loans that have extremely high interest rates. How they work is you write a check for the amount you are going to borrow plus a flat fee the company charges. Flat fees depend on what company you use, but some companies have fees as high as forty-five dollars. When the due date comes the company cashes the check or if you don’t have the money in your account you can ask for an extension. Everyday you extend the fee you get charged the base fee plus you get charged at a new interest rate. Basically the longer you extend your fee the more you have to pay and the richer the company becomes. Sometimes the interest rates are as high as 390 percent APR. It is simple to fall into even more debt because your original loan could be a minuscule amount but when you pay interest and fees you could double even triple your original amount. (5) You might be wondering why people resort to quick loan places but most do it without knowing the consequences. Jerry Jaramillo from the Department of Financial Institutions said “The most common complaint is communication. The lender is required to disclose the terms of the loan both orally and in written form. The communication issue arises when borrowers do not understand that this loan product is high rate/high cost in comparison to alternative forms of loan products.” Quick loans can be taken out online and the consumer won’t be warned orally. If you take a look at on-line websites such a CashNetUSA.com they never warn the consumer. The website just includes the positive aspects of taking out a quick loan and positive testimonials. They gain customers by completely misleading them. (1) For those that do know the consequences and are in the position of needing a loan the advantages outweigh the disadvantages. If you have bad credit, it is hard to have a
Farley 3 loan approved. What if an emergency comes along and no bank approves your loan. You can always go to a quick loan business and get cash exactly when you need it. Even if they know about the risk and high interest rates they take out a loan anyway because there is absolutely no way out. Most people taking loans find themselves extending the loan or getting another loan after they pay off the original loan. This is a vicious cycle because their financial situation never gets better, but it sure beats them starving on the streets. (2) Although it seems like there is no way out, there is a way to stop this vicious cycle. The most important thing to do is to learn how to live with a budget. If you learn to live within a certain budget it eliminates the risk of taking out a loan. It is never a good thing to spend more than what you make. It is important to limit the purchase of unimportant things because even small thing add up. If it is too late to budget and you need money fast there are many other alternatives. You could ask your employer for a pay advance or ask your creditors for more time to pay your bills. They could sometimes charge you less monthly until you are more secure financially. Try taking out a loan from your bank or credit union. Although it’s still expensive even a credit card loan is a better option. (5) As you can see in this chart from a 300 dollar loan you have to pay 50 with a quick loan or payday loan compared to other loans.
Farley 4
(2)
In all, spending more than your income is always bad. Quick loan companies just take advantage of your needs to make money themselves. You just have to make sure to follow strict guidelines and learn to live with a budget. If you do find yourself in need of cash always remember that there are alternatives to getting a quick cash loan.
Farley 5 Works Cited 1. Cash Net USA. 2. Comparison Chart. Payday Loans. < http://www.fcacacfc.gc.ca/eng/publications/PaydayLoans/PaydayLoans-6_e.asp> 3. Marples, Gareth. “How Payday Loans Work- A Last Resort?” 2004. 4. Rindfleisch, Terry. 5. Stress and Money. 6. “There’s Nothing Easy about Payday Loans.” 2007.