Good NestingShort term money is the stuff to remedy emergency expenses. These options are important when traditional options (such as a bank loan or credit cards) are unavailable and the financial stability of a family may be at risk. In this guide, we offer information about where to find short term money, how to apply for a loan, which alternatives exist, and more.
Applying for a Personal Loan
The first step that must be taken when considering a payday loan is to verify whether the state the family lives in allows the practice altogether. Living in Georgia, New York, New Jersey, Arizona, North Carolina, Connecticut, Maryland, Massachusetts, Pennsylvania, Vermont, West Virginia and the District of Columbia do not have access to payday loans due to them being illegal. However, there are several alternatives that borrowers can take advantage of, some of which we’ll explore further ahead.
The second step for borrowers living in states that allow payday loans is to find an adequate lender that can supply them with the amount of money they need. These can be storefronts located close to where the borrower lives, or a company offering their services online. Regardless, most lenders charge a percentage or dollar amount per $100 borrowed, which is then used to calculate the annual percentage rate (APR) that must be provided to the borrower before the agreement is made.
Most individual companies manage their own set of rules to determine who qualifies for a loan. However, they generally require their customers to have an active bank, credit union or prepaid card account. Some lenders ask for proof or verification of income from a job or any other source. Borrowers are required by law to provide a valid identification document that certifies they are at least 18 years old.
After a lender has been selected, the final step is to determine the amount that will be borrowed and when will the money be paid back. Most payday loans have very short term that don’t extend beyond 14 days and usually coincide with payday. A personal loan however, will have longer repayment periods and often more favorable terms.
Unclaimed Money
You may be owed money and not even know it. The source may have been a tax refunds or wages that were paid but never collected. In these cases, we’re talking about unclaimed money. Although the government does not operate a centralized location to find out if someone has unclaimed money, there are some state and agency specific resources that help figure out if this is the case.
People interested in getting back any unclaimed money they’re owed can make use of the local registries usually available in their state. Checking for tax refunds with the Internal Revenue System (IRS) or bank failures with the Federal Deposit Insurance Corporation (FDIC) are good ways to start. Members of credit unions that have failed can search for unclaimed deposits, while people enrolled in Veterans Affairs (VA) benefits can look for unclaimed life insurance funds.
Payday Loans
Payday loans, also known as payroll loans or cash advance loans, used to be more accessible but recent regulation into excessively high interest rates have cast them into bad light. They involve a lender providing a short-term unsecured loan to be repaid by the borrower when the next payday comes. Lenders usually request verification of employment or income (such as pay stubs or bank statements) to assure that the borrower is in a position to pay back the money. Some companies prefer to skip the verification process while others manage their own underwriting criteria.
Payday loans have existed in some form since the Great Depression. However, their use and reach was limited until the 1980s, when small community banks collapsed due to financial deregulation. This event allowed lending institutions to expand and fill the void. Payday loans have since become illegal in many states.
Other Alternatives
If not a personal loan, and without any unclaimed money, accessing short term funds from a credit union may fit your needs. Credit Unions provide a variety of financing options to their members. If you’re not already part of a credit union, it could take several weeks to access these funds.
Most credit unions ask interested parties to donate a small amount of money to a non-profit organization to get a membership. After this is complete, new members will have access to several financing options designed to help them cover all sorts of expenses. A popular and relatively new offering by credit unions is the Salary Advance Loan, which works like payday loans but with lower interest rates. Other loans designed to cover specific expenses such as monthly rent or vehicle repairs are also available. Some credit unions go as far as to offer low interest rate mortgages, credit cards and other forms of financial instruments to help their members.
Another way to receive short term funding is through a relatively new financial instrument called the Small Dollar Loan (SDL). It was pioneered by the Federal Deposit Insurance Corporation (FDIC) through a two-year pilot program in collaboration with more than 30 state and local banks across the country. These loans are designed to serve as a bridge between payday loans and standard bank loans by offering the borrower with an annual interest rate (ART) of 36 percent or less and a term of 90 days or more.
If the purpose of the loan is to cover car repairs or to purchase a new vehicle, the best option would be to apply for an auto loan. There are countless institutions around the country that offer attractive financing options tailored to allow their customers to repair their damaged vehicle or acquire the transportation method they need to stay at work.
