There are several methods by which we can avoid the payday loans. One such common method is to save regular amounts from our paychecks every week, which shall be a large amount at the end of a specific period. If the employer puts a matching fund, in a 401(k) plan in the office, or is able to extract an amount as tax from the paycheck, it shall lead to savings. With a little tact, patience and by being a little careful, we can avoid being stuck in a bad credit. Several methods can be used in order to acquire a bad credit payday loan, such as online methods or through local stores that shall help you in the process.

The providers of the bad credit payday loans, usually request you for your social security number, address, full name or even your personal check. In the later period the company may hold back our personal check, for an agreed amount, and then return us the required cash. However, on the elapse of the time period the bad credit payday loans shall deposit the check.

Payday Loans are usually considered for the purpose of short-term money. These loans are especially suitable for people who do not have satisfactory credit rating. Payday loans are actually short-term loans that are taken against earnings and are required to be paid back as soon as the paycheck is received. The borrower is required to fulfill certain characteristics, so that he becomes eligible for this kind of loan. Proof of earning of at least three months along with the proof of age being above 18 years is required to be submitted to the insurance company. This kind of loan is best suited for emergency purposes, but not suitable for making it a long term or a regular source of finance.

Secured Loans are more suitable for long-term purposes:

Secured loan is also another option for those people, who have a poor credit rating. Since this is a secured loan, it is more suitable for those who have a home. The process is quite similar, as the lenders just lend money against the equity in a home. The home can be either mortgaged or fully owned, but the loan is provided on the basis of such a home. The interest rates on such loans are usually low and the repayment periods are too long. There are loans that may be repaid in a long time period even extending up to 30 years. The representatives of the lending company assess the house, on the basis of which the loan is provided, in order to decide on the valuation of the asset. There are many lenders, who lend as much as 125% of the valuation of the house, others may settle at 85% of the equity value.

The Negative Equity Trap

The main problem that exists with the loan is that the interest rates of the loans may rise and fall with the value of property. In case of the property value dropping, there is a rise in interest rates and the homeowners find themselves trapped in a negative equity. This negative equity has the effect of increasing the amount of repayments. This is not good for the financial health, and has can damage the credit rating of the borrower.

"GET CASH UNTIL PAYDAY! . . . $100 OR MORE . . . FAST."

The ads are on the radio, television, the Internet, even in the mail. They refer to payday loan - which come at a very high price.

Check cashers, finance companies and others are making small, short-term, high-rate loans that go by a variety of names: payday loan, cash advance loans, check advance loans, post-dated check loans or deferred deposit check loans.

Usually, a borrower writes a personal check payable to the lender for the amount he or she wishes to borrow plus a fee. The company gives the borrower the amount of the check minus the fee. Fees charged for payday loan are usually a percentage of the face value of the check or a fee charged per amount borrowed - say, for every $50 or $100 loaned. And, if you extend or "roll-over" the loan - say for another two weeks - you will pay the fees for each extension.

Under the Truth in Lending Act, the cost of payday loan - like other types of credit - must be disclosed. Among other information, you must receive, in writing, the finance charge (a dollar amount) and the annual percentage rate or APR (the cost of credit on a yearly basis).

A cash advance loan secured by a personal check - such as a payday loan - is very expensive credit. Let's say you write a personal check for $115 to borrow $100 for up to 14 days. The check casher or payday lender agrees to hold the check until your next payday. At that time, depending on the particular plan, the lender deposits the check, you redeem the check by paying the $115 in cash, or you roll-over the check by paying a fee to extend the loan for another two weeks. In this example, the cost of the initial loan is a $15 finance charge and 391 percent APR. If you roll-over the loan three times, the finance charge would climb to $60 to borrow $100.

Alternatives to Payday loan

There are other options. Consider the possibilities before choosing a payday loan:

When you need credit, shop carefully. Compare offers. Look for the credit offer with the lowest APR - consider a small loan from your credit union or small loan company, an advance on pay from your employer, or a loan from family or friends. A cash advance on a credit card also may be a possibility, but it may have a higher interest rate than your other sources of funds: find out the terms before you decide. Also, a local community-based organization may make small business loans to individuals.

Compare the APR and the finance charge (which includes loan fees, interest and other types of credit costs) of credit offers to get the lowest cost.

Ask your creditors for more time to pay your bills. Find out what they will charge for that service - as a late charge, an additional finance charge or a higher interest rate.

Make a realistic budget, and figure your monthly and daily expenditures. Avoid unnecessary purchases - even small daily items. Their costs add up. Also, build some savings - even small deposits can help - to avoid borrowing for emergencies, unexpected expenses or other items. For example, by putting the amount of the fee that would be paid on a typical $300 payday loan in a savings account for six months, you would have extra dollars available. This can give you a buffer against financial emergencies.

Find out if you have, or can get, overdraft protection on your checking account. If you are regularly using most or all of the funds in your account and if you make a mistake in your checking (or savings) account ledger or records, overdraft protection can help protect you from further credit problems. Find out the terms of overdraft protection.

If you need help working out a debt repayment plan with creditors or developing a budget, contact your local consumer credit counseling service. There are non-profit groups in every state that offer credit guidance to consumers. These services are available at little or no cost. Also, check with your employer, credit union or housing authority for no- or low-cost credit counseling programs.

If you decide you must use a payday loan, borrow only as much as you can afford to pay with your next paycheck and still have enough to make it to the next payday.

To Complain/For More Information
If you believe a lender has violated the Truth in Lending Act, file a complaint with the FTC.

The FTC works for the consumer to prevent fraudulent, deceptive and unfair business practices in the marketplace and to provide information to help consumers spot, stop, and avoid them. To file a complaint or to get free information on consumer issues, visit www.ftc.gov or call toll-free, 1-877-FTC-HELP (1-877-382-4357); TTY: 1-866-653-4261. The FTC enters Internet, telemarketing, identity theft, and other fraud-related complaints into Consumer Sentinel, a secure, online database available to hundreds of civil and criminal law enforcement agencies in the U.S. and abroad.