Finance Insights: What is an APR?

Taking on the APR and Finance Charges for your Credit Line

While taking credit, whether it be through a credit card, a home equity credit line or a cash advance, you will come across the terms APR and finance charges. It is very important for a borrower to understand these terms correctly, especially the APR or Annual Percentage Rate.

An APR is meant to provide the potential borrower of funds a means to shop around and compare various credit products. Simply stated, it is the cost of credit. More explicitly, the APR represents the interest rate you pay if you carry an unpaid balance for purchases or take out a cash advance. It is important to remember that APR is calculated on a yearly basis, as opposed to monthly rates. An APR of 18% implies that the monthly finance charges will be 1.5% of the opening balance.

The higher the APR, the more you can expect to pay on your line of credit, in real terms. Further, APR is calculated over the total time period of the loan, and will change if you plan to pay back sooner. Additionally, an APR is subject to change, even if it is termed as ‘fixed’, though you will be informed prior to the change.

The standard APR for cash advances varies depending on your location, but some Bloomberg estimates place it around 390%, though it can go as high as 600%.

Finance Charges can be explained as the dollar amount you will pay to use credit, based on the balance outstanding currently, the APR and the time period. It is essential for you to know how your particular card company calculates finance charges, since this will affect whether you end up paying less or more. Typically, the method will be one of the following four:

Previous balance – will apply the monthly finance charge on the opening balance for the billing cycle, implying that purchases, advances or payments during that cycle are not included.

Ending Balance – As implied, the finance charge is applied on the ending balance of the billing cycle, which will include purchases, advances and payments made through that cycle.

Adjusted Balance – ensures that you pay a lower amount in finance charges since the payments made during the billing cycle are subtracted from the opening balance and thus reduce this figure.

Average Daily Balance – is widely used and entails the addition of each day’s balance during the billing cycle, averaged over the number of days in the cycle.

Also, be aware that some loans carry a minimum finance charge that will be applicable even if your month’s finance charge amounts to less than that figure.

CBS Evening News: Payday Loans and US consumer debt

Have you heard that nearly 2600 Americans a day are filing for bankruptcy? Many Americans in need are turning to payday loans. The problems documented in the industry are well known and truly stated by the media, but not always a true statement of truth. The biggest mistatement involved the APR, that is usually touted as being over 300 - 500%. These numbers are truly stated but not statements of truth. If they were true, banks that charge outrageous fees for late credit card payments and bounced checks should also be thrown under the bus. As always study the truth about cash advance payday loans for yourself before you borrow any money from anyone.

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Pennsylvania's new law aimed directly at online payday lenders

Last week, Pennsylvania lawmakers set out to make the online payday lending playing field on par with their brick and mortar counterparts. In a continuing trend, many state legislators are seeking to bring some regulation to the payday lending industry. The Morning Call reports:

''This is a major victory for Pennsylvania consumers,'' Kerry Smith, a lawyer with Community Legal Services in Philadelphia, said following the announcement Monday.

Until last week, Pennsylvania applied its Consumer Discount Company Act only to lenders that had a storefront in Pennsylvania. Under a new interpretation, the act now will apply to anyone making consumer loans.

The act limits the interest and fees a non-bank company can charge for small loans. That's trouble for payday lenders, whose short-term loans, if applied over a year, would far exceed the act's interest-rate caps.

The issue is a bit moot in that payday lenders can set up offshore and avoid regulation altogether. Much like online casinos. Whether that will occur or not is to be seen in the future.

Also read the Supreme Court's decision on the Advance America lawsuit.

Northern Michigan Covers Cash Advance Loans

With legislation in the Michigan legislature as we speak concerning the payday loan industry, it was interesting to see the coverage of Marquette's WLUC concerning the payday loan industry.

MARQUETTE -- Payday loan companies have been in existence for about fifteen years, and sometimes there is a stigma attached to their business. However, many people definitely feel a need for small, short-term advances that most banks don't offer, particularly to those with bad or no credit.

All cash advance agencies must be licensed by the state and are subject to monitoring to insure proper operating practices. They also fall under the purview of the Truth in Lending Act, which means they must disclose any fees or interest rates charged to their customers. Also, they no longer allow people to roll over their loans, which protects consumers from getting in over their heads in debt. Natalie Zimmermann reports the story.

Are Payday Lenders to Blame for Consumer Woes?

This article was published in the NY Times last year. A fascinating read.

Article Tools Sponsored By
By ROBERT H. FRANK
Published: January 18, 2007

When a lion achieves alpha male status, one of his first acts is to kill all unrelated cubs in the pride. Is that a bad thing?

As biologists have long realized, the question makes little sense. In the bitterly competitive environments in which lions evolved, the dominant male’s behavior was favored by natural selection because it brought females into heat more quickly, thus accelerating the transmission of his genes into the next generation. His behavior appears brutal to human onlookers and surely makes life less palatable for lions as a group. In the Darwinian framework, however, it is a simple fact of existence, neither good nor bad. In any event, such judgments have little practical significance, since moral outrage alone cannot prevent a dominant lion from killing cubs.

In contrast, when humans prey on weaker members of the community, others are quick to condemn them. More important, such denunciations often matter. Because complex networks of voluntary association underlie almost every human transaction, the bad opinion of others can threaten the survival of even the most powerful individuals and organizations.

But the supply of moral outrage is limited. To maximize its usefulness, it must be employed sparingly. The essential first step is to identify those who are responsible for bad outcomes. This is often harder than it appears. Failure at this stage steers anger toward people or groups whose behavior is, like the alpha lion’s, an unavoidable consequence of environmental forces. In such instances, moral outrage would be better directed at those who enact the rules under which ostensibly bad actors operate.

Full Story

Video: Consumer Affairs chimes in on Payday Loans

Consumer Affairs jumps into the world of video in a campaign against payday loans. Do you agree with the message?

Comparing Cash Advances in the U.S. versus United Kingdom

Have you ever wondered what are the differences of cash advance loans in other countries outside of the United States? It's true the payday lenders are regulated differently in other countries similar to the banking industry.

An Auburn University finding outlines numerous differences between the USA and our cousins across the pond.

In the US you must meet the following criteria to get a payday loan:
1. You must live within the United States.
2. You must have full time employment and have been with the same company for 6 months.
3. You must be at least 18 years of age
4. You are paid weekly.
5. You must earn at least $1000 US a month

In the UK you must meet the following criteria to get a payday loan:
1. You must live within the UK, Wales, Northern Ireland, or Scotland.
2. You must have full time employment
3. You must be at least 18 years of age
4. You income must be at least £300 each payday after all deductions and taxes.
5. Must have a bank account that is at least 6 months old

Of note, in the US, most payday lenders shy away from borrowers under 18 years old as at that age the risks usually outweigh the benefits. If you are 18, usually a family member would be a better source of emergency funds or if you are in college many universities offer emergency loans.

Ohio's New Payday Loan Laws; Effective 9/1/2008?

Ohio is one of several states seeking to gain more regulation over the maverick world of Payday Loans. Essentially the Ohio legislature has mandated that a cap of $3 per $100 be placed on repayment terms of cash advance loans.

New restrictions are in place for the payday loan industry. A bill in Ohio was recently passed that will put new limits on payday loans. The law, which is effective September 1, 2008, would limit the allowable annual interest rate on payday loans in Ohio to 28%. This is a pretty low rate if you are familiar with payday loans and their outrageous APRs.

Payday lending offices usually charge about $15 for every $100 borrowed on a two-week loan, which comes out to an annual interest rate of 391%. The bill also means a borrower is only allowed four payday loans per year, with a maximum loan amount of $500, much less than the current limit of $5000. Obviously this bill would put a nice dent in the payday loan industry in Ohio.

Full Story Here: http://www.news-herald.com/site/news.cfm?newsid=19763311&BRD=1698&PAG=461&dept_id=21849&rfi=6

But the industry is not taking these attacks lightly. Ohio payday lenders can start collecting signatures for a ballot referendum that, if approved in November, would let them continue charging the same interest rate as they do today.

To be continued.

Payday Loans Get Southern Comfort in Louisville

Cash Advance Louisville

Louisville is a great place to live, but rent, insurance, and the other costs associated with daily life can add up, so you may want to keep in mind that a cash advance Louisville loan is an option you have to help you stay out of debt.

Louisville is situated in north-central Kentucky on the Kentucky-Indiana border at the only natural obstacle in the Ohio River, the Falls of the Ohio. Louisville is the county seat of Jefferson County, and since 2003, the city's borders are coterminous with those of the county due to merger.

This type of loan should not be used for purposes such as paying of previous debts, but rather it is a source of money you can use to pay bills when you run low on cash between paychecks. Cash advance Louisville loans are not for everyone, and you should research all of your options, but if this is the best choice for your situation, consider applying online to save time and money.

When you apply for a cash advance Louisville loan in person, you will need to travel to many different lending companies and fill out similar applications at each location. Not only does this waste precious time, but you also spend additional money on transportation. When you apply online, you fill out one simple electronic form for your cash advance Louisville loan, which is then sent to multiple lending companies. You also can do this from the convenience of your own home, rather than having to drive from place to place.

The approval process for your cash advance Louisville loan is also much faster online. In fact, you may be instantly approved. There is no application fee, and you don't have to undergo a credit check. Once you qualify, you will receive your cash advance Louisville loan with a day or two, usually within a few hours and most often in 24 hours. By receiving the cash this quickly, you can have a better chance of paying your bills on time. A cash advance Louisville loan cannot help you if you receive the money after your deadlines have passed! To begin the application process, click on the “Apply Now” button.

Payday Lender Debate: Saints or Sinners?

The payday loan industry is indeed in a fight for their livelihood. In regards to public perception, there are only a few choice industries with worse public perceptions, ranking close to the cigarette industries, gun control and prescription drug companies. But as with each of the aforementioned groups, civil protections, one could argue, allows adults to make adult decisions.

With so much government oversight coming on the ballots, the question must be addressed, are payday lenders to blame for community blight, in communities that had blight long before the lenders arrived, or are the fees that lenders are charging their customers totally outrageous. In Long Beach California the city council recently voted to had a temporary moratorium on allowing new lenders to set up shop. The Los Angeles business journal reports,

Check-cashing and payday loan businesses are often likened to predatory lenders that take advantage of low-income customers, and the movement to crack down on them appears to be gaining momentum.

The City Council in Long Beach, the second largest city in Los Angeles County, has voted to place a six-month citywide moratorium on new check-cashing and payday loan businesses on the grounds that they cause blight and foster crime.

Industry representatives dispute that and argue the storefronts provide a much-needed service for customers.

“Our industry as a whole is evolving, and more and more of the businesses are larger corporations and not the mom and pops,” said Mark Thomson, director of government relations for Washington-based MoneyTree Inc. “The companies are located by Wal-Marts or Starbucks and fit very much into the strip mall surroundings.” More..

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Debt Solutions There Are No Shortcuts

Your credit, speaks before you do. In fact even employers check credit when making employment decisions. Imagine being denied a job that you are qualified for, due to poor credit. They say in life there are no shortcuts. Debt Consolidation companies vary in their ability to assist the end consumer. Again, as the mantra of this site has been from day one, do your homework.

The Truth About Credit Repair From CFSA

Only consistent efforts and making payments on your debts will improve your credit.
Beware of companies that:

* Promise to erase your bad credit or remove bankruptcies and judgments from your credit file. No one can have accurate information removed.
* Promise you fast and easy credit repair. If you have bad credit, it can take years to repair your credit legitimately.

* Offer to create a new identity for you. If you make false statements on loan applications, or use a fake Social Security number, you will be committing fraud. You can also be charged for mail or wire fraud if you use the mail or telephone to apply for credit and provide false information.

* Want you to pay for credit repair services before providing any service. The company might not be legitimate.

* Will not tell you your rights and what you can do yourself. Remember you can order the credit report yourself. If you see errors on your report, you can also request that the credit reporting agencies make appropriate changes.

Keep in mind, many states have laws that regulate credit repair companies.

This is a quick overview of things to consider when looking to request credit or repair damaged credit.

Payday Lending For Seniors

I was recently doing some research regarding the payday loan industry and senior citizens. With the cost of living skyrocketing and fixed incomes, well staying fixed, I thought it would make for some interesting reading if I were to post the results I found.


While I came across an old article ran in the Wall Street Journal regarding seniors and the payday loan industry, it seems as though the authors did not do all of their homework. The authors, ELLEN E. SCHULTZ and THEO FRANCIS charged that payday lenders are in the market of taking advantage of seniors on fixed incomes, lets examine:


The law bars the government from sending a recipient's benefits directly to lenders. But many of these lenders are forging relationships with banks and arranging for prospective borrowers to have their benefits checks deposited directly into bank accounts. The banks immediately transfer government funds to the lenders. The lender then subtracts debt repayments, plus fees and interest, before giving the recipients a dime.


As a result, these lenders, which pitch loans with effective annual interest as high as 400% or more, can gain almost total control over Social Security recipients' finances.

There are no publicly available statistics on the proportion of payday loans that are backed by Social Security and other government benefits. But dozens of legal-aid lawyers, senior service groups and credit counselors across the country say they are seeing more and more clients on Social Security struggling with multiple payday loans.





Of note are the some of the major rebuttals that I have read regarding the shortcomings of this article. In particular, from a representative from the CSFA responded:


We want to set the record straight.


The February 12th front-page Wall Street Journal story by Ellen E. Schultz and Theo Francis, “Social Insecurity: High-Interest Lenders Tap Elderly & Disabled” confuses payday lenders with other types of small loan services: primarily installment and catalog lenders.
The article describes loan practices that are NOT conducted by payday lenders.
Errors in the WSJ article

• Example 1:The article says payday lenders are “…forging relationships with banks and arranging for prospective borrowers to have their benefits checks deposited directly into bank accounts.” This is patently false. State laws only authorize payday lenders to hold a personal check, deposited on the borrower’s payday.


• Example 2:The story says: “One-fifth of those without conventional bank accounts are receiving government benefit checks through nonbanks, including payday lenders.” This, too, is blatantly false. Payday lenders do not receive checks on behalf of recipients (state law prohibits this practice) and 100 percent of payday lending customers have a checking account at a bank or credit union. Read More Here.

Seniors are always at risks because historically they have been easy targets. Seniors be sure to speak to your local financial representative before considering signing any loan. If you need money then payday loans are one alternative. Weigh the options of the option that will best suit your short term and long term needs.

Video: A Look at DC Residents and Payday Loans

While there has been some recent major changes in the world of online payday loans in Washington DC's interest rate limits, many residents continue to praise the benefits of the payday loan industry relative to their situations.



As always at this site we do not want to influence your decision to use a payday loan or not. What is important is that you are informed about your financial decisions. Informed borrowers, lenders and investors make better decisions. Get as much information as you can.

Ohio is Battleground for Payday Loan Industry

The Associated Press, today ran a story we have been following for a while covering the payday loan industry's court battles with the state. While there are many payday loan opponents in government, we rarely hear of government officials offering alternatives.

NEW YORK (Associated Press) - Payday lenders fighting to repeal a statewide crackdown on their industry on Monday sued two of Ohio's top elected officials, arguing that repeated hurdles the lenders have faced in getting the issue on the November ballot are unconstitutional.

An industry group called the Reject House Bill 545 Committee claims in the suit filed in Franklin County Common Pleas Court that a failure by Attorney General Nancy Rogers and Secretary of State Jennifer Brunner to act promptly on its proposed ballot language violates its rights to try and overturn the law. Rogers has failed to certify three versions of the group's petition language.....
The suit came the same day Cash America International Inc., a pawn broker and cash advance provider, said it expected to post a second-quarter profit of 62 cents to 64 cents per share _ up about 10 cents from previous expectations.

The company said it has not yet closed any of its locations in Ohio as a result of the new law. The company said in May that the change could force it to close up to 139 Ohio locations

What is important to note is that when the government fights to take away programs from people ing need, it should just the same work to offer alternatives. I see people working hard everyday trying to stay afloat. Payday Lenders serve a useful purpose.

The Payday Loan Process

The Payday Loan Process

A payday loan is a means of getting quick cash to tide you over between paychecks in case of an emergency, and you can get one even if you have bad credit. The process of taking out a payday loan is fairly simple. The denomination of a payday loan, also known as a cash advance, can be from $100 to over $1500. As the name suggests, a cash advance is generally given out in the form of cash, but in some cases, the money will be deposited electronically into your bank account to be withdrawn using your ATM.

This is how the process works – say you need a loan of $100 and its 10 days to your next paycheck. You would walk in to a payday loan center or select a lender online. There are plenty of lenders offering varying interest rates so it’s a good idea to shop around before picking one. The payday loan company will have you fill out a form that verifies that you are employed somewhere, you have a checking account and your salary meets a minimum requirement to pay back the loan. There is no credit check or any verification of pending liabilities, so even people with bad credit scores can get a cash advance. The next step is to return the filled out form and wait for your loan approval. This typically takes place within 24 to 48 hours and you receive the cash from the center or through your bank account, as described above.

When you receive payday loan approval, your creditor will ask you for a post dated check, i.e. a check that is dated and may be cashed only after a certain future date – say, 2 weeks later, when you are sure your paycheck will be credited to your account. The check amount will be the initial principal amount of $100 and the interest charges, say $15 for a 2 week loan. While $15 doesn’t sound like too much, it is approximately 390 percent APR – a high interest rate. At the end of 2 weeks, the creditor can cash the check and receive $115 or you have the alternative of rolling over the loan for another stipulated amount of time for a predetermined fee. However, some states do not allow rollovers or limit the number of rollovers on payday loans. Most commercial banks do not offer payday loans, so you will most likely go to a licensed payday lender.

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Los Angeles Times Discusses Payday Loans

When you are short on cash and have limited options for getting access to that cash, a payday loan can be a saving grace. Espcially in Los Angeles where gasoline prices usually top the country. Opponents of payday loans, usually refer to the high interest rates, but as discussed before, these rates are usually much less than even a bounced check fee from the friendly neighborhood bank.

But recently Christopher Thornburg of the Los Angeles Times argued why payday loans are more than just rich corporations preying on the innocent borrowers, but rather serves a point of view of lenders serving a need that banks and other institutions would not touch. In the article Christopher goes on to say that,

Despite high fees, people continue to use payday lenders with some frequency. Fool me once, shame on you; fool me eight or nine times, and clearly something else is up. It might be easy to accuse the firms of taking advantage of people and earning unfairly high profits, but if profits are so high, why hasn't there been a mad rush by the very competitive banking industry to provide these services in under served (Apply for a cash advance loan here.) neighborhoods? Given my personal financial institution's predilection for hidden fees and what would seem to be unfair charges for even simple services, I wouldn't chalk it up to an ethics issue. We also need to remember that before there were payday lenders, folks hard up for a few bucks had to go to an underground lender who would charge even more outrageous fees and possibly threaten bodily harm. Full Story Here.

When it comes to financial advice always do your due diligence. Cash Advance Lenders in Los Angeles are all willing to help you get a loan, but finding the best loan is the biggest challenge. But when it comes to having your lights turned off or borrowing money that no one else would loan to you, I know what many Americans would do.

Apply for a cash advance loan here.

Cash America Second Quarter to Exceed Initial Earnings Estimates

In a sign that the payday loan industry is indeed filling niches across the country, corporate players are projecting strong earnings.

Apply for a Cash Advance Here

Cash America Second Quarter to Exceed Initial Earnings EstimatesFORT WORTH, TexasTX-CASH-AMERICA-INTL

FORT WORTH, Texas--(BUSINESS WIRE)-- Cash America International, Inc. (NYSE: CSH) announced today that management believes that its second quarter earnings per share will come in well above its previously provided guidance for the second quarter ended June 30, 2008. The Company's pawn lending business contributed to the higher than expected results as revenue from pawn loans and increased gross profit dollars on the sale of merchandise exceeded expectations.

Full Story Here

Apply for a Cash Advance Here

Payday Loan vs Bank Overdraft Fees

Payday Loan Data & Statistics:

Today, we will quickly cover one of the biggest misconceptions regarding payday loans: They are ultra expensive. If you compare the interest rates of a payday loan, to an interest free loan from your brother, of course, any rate will seem high, let's investigate farther.

Before we begin, lets start with the question; Are payday loans the right solution for everyone? Of course not. Many people in need of a loan can turn to family members and or credit cards. But when those options are not available often times a payday loan can be a very useful solution.

(Interested in a Payday Loan, Apply Here)

The Community Financial Services Association of America (CFSA), released a report recently highlighting myth vs. reality in the world of payday loans. According to the CFSA,

The Myth: Payday loans are extremely expensive and have exorbitant interest rates.

Reality:
Payday loans are two-week loans—not annual loans! Industry critics quote the “390% annual percentage rate” to misrepresent the truth and to help make their case. The typical fee charged by payday lenders is $15 per $100 borrowed, or a simple 15 percent for a two-week duration. The only way to reach the triple digit APRs quoted by critics is to roll the two-week loan over 26 times (a full year). This is unrealistic considering that many states do not even allow one rollover. In states that do permit rollovers, CFSA members limit rollovers to four or the state limit—whichever is less.

But, even if the loan was rolled over for the entire year, the high APR of payday loans pales in comparison to the realistic alternatives considered by consumers.

How does a $100 payday loan compare?

$100 payday advance with a $15 fee = 391% APR
$100 bounced check with $54 NSF/merchant fees = 1,409% APR
$100 credit card balance with a $37 late fee = 965% APR
$100 utility bill with $46 late/reconnect fees = 1,203% APR.

It is this type of data that allows us to feel as though we are offering a useful service that is needed in the community, not one that is a blight to people in need.

(Interested in a Payday Loan, Apply Here)