Payday loan suggestions
July 19, 2013 2:21 PM   Subscribe

I am going to get a payday loan in the amount of around $1000. (I know, with complete certainty, that I will be able to pay back the loan and interest within ten days.) Can anyone offer advice on this process, particularly online payday loans? Are there more reputable sources that I should work with? What should I watch out for?

In order to finance a move, I need to borrow around $1000 for ten days to put a deposit on a place. I'll be able to pay this money back at the first of August, when my next paycheck comes in; I've budgeted this, and it's clearly something I will be able to pay back in full, including whatever interest they charge (which I'm sure will be around 30% of the loan.)

Essential details: I have talked to my bank and exhausted all other options; this is my best bet. I have poor credit (in the 600s) so a bank loan or a loan from a more reputable online lender (I've tried several) is not an option. So: please assume that I've thought about the perils here. I know that payday loans are generally not the best idea, and I know I'll pay a lot in interest.

What I'm wondering is: what's the best way to do this? I am a resident of New Mexico who's doing this in Colorado. It appears that Colorado payday loans aren't very well-regulated, so perhaps the best course of action would be to do an online payday loan. However, I'm not sure where to start there. It's not easy to know that online payday lenders are reputable. Can anyone offer recommendations? Perhaps there is a site that reviews these lenders? Really, any information about this process will be helpful to me. Thanks in advance!
posted by anonymous to Work & Money (14 answers total) 1 user marked this as a favorite
I had some difficult times and used payday loans a few times. I had no credit cards, and had to travel or pay something immediately. Like you, I made sure I would not get trapped in a cycle. I also reasoned that the exhorbidant interest was about what I would end up paying if I borrowed from a friend then bought them dinner to thank them. It worked for me.

Anyway... I used a local place a few times, and also an online service I found they were very professional and easy to deal with, so I would recommend them based on my experience.

A couple things to be aware of:

You will need to gather some paperwork and fax some things, and possible mail a signed contract. I'm not sure of their current process.

Once you pay them off, they WILL continue to contact you with offers of loans. I had them email and call. They were always polite, but they obviously want to sell you their service.

Good luck!
posted by The Deej at 2:39 PM on July 19, 2013

Hi, Anonymous. Here in Oregon there are laws restricting the loans to a maximum of $300. I don't know where you live, but you might want to check on that if you haven't already.

I've used these places in the past a time or two and it was relatively simple. I think the ones I used were America's Cash Express and I had no problems with them.
posted by tacodave at 2:42 PM on July 19, 2013

Just know that you will NEVER EVER EVER hear the last of the people who gave you the loan or any other company that also provides the same service once you do this. I took out a payday loan once, and though I paid it right off, my phone started getting a ton of unsolicited texts, and I had to set up a bajillion filters to get rid of all the spam I got from every payday loan company in the whole wide world.
posted by xingcat at 2:44 PM on July 19, 2013 [1 favorite]

Pew Charitable Trusts' breakdown of Payday lending laws by state (in case later others want the same information for a different state.) Colorado's law appears to limit the amount loaned to any borrower at one time to $500, and that sounds like you'd have to go to two lenders to get your $1000. They can charge a financing fee (up to 20% of the first $300, and 7.5% of the loan in excess of that) and then interest on top of that at 45% per annum, prorated if you pay it back before the loan term. (They also can charge up to $30 a month for each month that the loan is not repaid, but that sounds like it will not be a problem for you?)

So if you have to get two $500, your financing charge is going to be $150 ($75 for each). I plead ignorance of how to do the APR calculation over ten days, but that will be some amount of money? I think it's the financing charge that really kills, though.

For a good dose of fear-mongering (which is an important part of being a cautious borrower!)'s Robert Longley, US Government Info Guide has a refreshingly self-conscious explanation of some of the risks involved with online payday loans. ("As you look at the automated ads that surround this column...")
posted by Made of Star Stuff at 2:45 PM on July 19, 2013

I've used Plain Green Loans probably a half dozen times. They are efficient and reasonable and allow you to pick the dates and intervals of your loan payments, and you can pay the loan off early as well. Of course, the rates are obscene, but the convenience factor is great (they direct deposit the loan the next day). Good luck!
posted by averageamateur at 3:06 PM on July 19, 2013

The Colorado Attorney General's Office enforces Colorado's Uniform Consumer Credit Code. You'll probably want to check out their disciplinary history with respect to any payday loan company you're considering. It can be found here.
posted by craven_morhead at 3:21 PM on July 19, 2013

I hope you've talked to your employer about getting a cash advance on your paycheck already? If you tell them about the exact circumstances (including your plan to use a payday lender), they may help you.
posted by amanda at 4:10 PM on July 19, 2013 [5 favorites]

I know you've done your homework, but just in case you haven't tried this option, talk to a credit union. You could get an unsecured loan at mine with 600 credit. The interest would probably be around 15-20% and the fees would probably be less than $100 ($30 in my case.) You have more of an opportunity to explain your situation and the situation with certain debt items that might show up on your credit report. Again, I understand the premises of this question, but I would hate for you to miss an opportunity to get a loan on much better terms if it exists for you.
posted by michaelh at 4:16 PM on July 19, 2013

using the numbers from Made of Star Stuff, here's a little math.

to receive $1000 now you would need to borrow 2*x where

500 = x + [.2*300 + .075*(x-300)] ==> x = 581.0811 ==> borrow $1,162.16

over 10 days you're charged interest at a rate of 45% per year, so at the end of 10 days you owe

1,162.16*(1.45)^(10/365) = 1,174.053

giving the payday lender a return of 1.17 over 10 days. this is equivalent to an annual rate of

1.17^(365/10) - 1 = 348.626

that's not 348% interest. it's 34,863% interest.

maybe i'm wrong, someone could correct me later in the comments.
posted by cupcake1337 at 5:14 PM on July 19, 2013

I'm in here to say what amanda said. Many employers will help you out with a payday advance, especially if you're a "good" employee. If you're going to a new company as part of the move, they might be more understanding of this, and even expect it. It doesn't hurt to ask!

Any way you can reduce the amount of the loan by getting friends to spot you some? Every bit helps.
posted by cathoo at 6:02 PM on July 19, 2013

To answer your actual question, I have used a local one where I live. I was nervous to go in, but the experience was very professional and pleasant. I had to fill out an application and give them copies of a bank statement, payroll stub, and maybe some other basic thing I've forgotten. I was limited to $300 on my first loan and then more after they saw I would pay it back.

I have not needed them in months and have only received a handful of calls asking if I needed any money. I have not received calls from associated businesses, but I do get some junk mail occasionally.
posted by michellenoel at 6:14 PM on July 19, 2013

When you pay back the $1,000 loan plus the interest, will you have enough left out of that paycheck to get through without needing to take out another loan to cover your needs? That is the loop that most people who get payday loans get into and can't get out of.
posted by aryma at 8:50 PM on July 19, 2013 [2 favorites]

When you pay back the $1,000 loan plus the interest, will you have enough left out of that paycheck to get through without needing to take out another loan to cover your needs? That is the loop that most people who get payday loans get into and can't get out of.

This... So much this. I have a couple acquaintances that got themselves stuck, and it just snowballed.

Seconding the suggestion to talk to your employer about an advance. Or a family member. Maybe even a charitable organization or church will help you out? But payday loans are never the answer. :(
posted by xedrik at 9:07 PM on July 19, 2013

maybe i'm wrong, someone could correct me later in the comments.

I think your reasoning is incorrect. The loan origination fees are not bundled in again and again, for starters, and the extension/late/overdue period of the loan does have a legal maximum that applies.

For starters, I get a straight $150 from the first calculation of fees. So $1150 is due from Day 1.

I think you got an exponential value in your formula, but I'm too tired right now to parse it back out.

As far as I can tell, a 350% equivalent APR (more or less) is really what this works out to in terms of a loan repaid in ten days as planned. Which should properly be seen as pretty brutal, but I wouldn't say impossible to handle in an emergency. The problem is that the industry knows what percentage of customers are not actually good at predicting what they can handle.

But in any case a rolled over loan accrues at the legally mandated 45% APR and the origination fees are not charged over and over again, at least by my reading of the Colorado terms. Mathematically, that means that the longer the loan is held, the effective APR actually decreases and approaches 45% APR. Not that one recommends this strategy, but the maximum that they should be able to charge for a loan held for one year would be $1150 (split into two loans, remember) * 1.45, or about $1667, plus another $360, for an effective APR after one year of something around 90%.
posted by dhartung at 2:10 AM on July 20, 2013

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