Payday Loans – What is the True Cost?

When you need quick cash, what could be more convenient than taking out a same-day payday loan that is deposited directly into your bank account? On your next payday – a week or two later – the loan is automatically repaid because the creditor has your bank information. Sure, there is a fee, but there’s no credit check, no collateral, and no lengthy application process like there is for a personal loan. You just walk into the payday loan office or go online, fill out a few forms proving that you have a steady job and a checking account, and you get up to $2,000 the same day.It sounds easy, but it may not be such a good deal. Payday loans are defined as short-term loans with an interest rate above 36%. That sounds like a high rate, doesn’t it? After all, you see new car loans advertised for zero percent, and home mortgages for 6%. Personal loans from banks are generally between 10% and 15%. Even credit card cash advances can be cheaper. A $300 cash advance on the average credit card, repaid in one month, would incur a finance charge of $13.99 at an APR of 57%.To make it sound less expensive, payday loan providers don’t advertise their annual percentage rate (APR) the same way credit card and personal loan providers do. They state the interest in terms of a fee per $100 loaned. Here’s a typical example.How the Fee Translates to APR You walk into the payday loan office or apply online. You need to borrow $500 until your next payday, which is in seven days. The fee for your loan is $15 per $100 borrowed. You think, “That’s not so bad, it’s 15%, isn’t it”? You agree to the loan terms and you give the lender a check in the amount of $575, dated in seven days.When your loan is due to be repaid in seven days the creditor will cash the check or debit your checking account. If you have $575 in your account, then you are finished and the transaction is completed.You will have paid $75 for your loan. That translates into an annual percentage rate (APR) of 780%. It’s very high, but that’s because calculating the APR is complex and involves not only the loan amount and the fee, but the period of the loan-how long until you pay it back.The big danger is that many customers can’t pay back the loan on time. Think about it – a customer who does not have $500 in his or her bank account this week is unlikely to have $575 in their account next week. Many customers “roll over” their loans. They cannot pay on the due date, so the creditor charges the $75 fee and agrees to collect on the next payday.Are You the Average Payday Loan Customer?According to the Consumer Federation of America, from a single lender each year the average payday loan customer takes eight to thirteen payday loans or loan renewals. So if you are the average customer, let’s say you roll over or renew your $500 loan 10 times in one year. To borrow $500 for 10 weeks, you will pay a total of $750 in finance charges plus repay the amount borrowed. Your $500 payday loan will end up costing you $1,250.There are additional risks and fees. To get a payday loan you are required to give the creditor a personal check as repayment. If your check bounces, your bank will charge you a fee – often as high as $40. You can lose your bank account or have difficulty opening a new bank account if you develop a record of bouncing checks used to get payday loans.Before you take out a payday loan, carefully consider the real cost – and ask yourself if it’s worth it.

Small Business Loan Update – Stimulus Bill Helps Bailout Businesses If They Cannot Pay Loans

As we continue to sift dutifully through the over 1,000 pages of the stimulus bill (American Recovery and Reinvestment Act of 2009), there is one provision that is not getting much attention, but could be very helpful to small businesses. If you are a small business and have received an SBA loan from your local banker, but are having trouble making payments, you can get a “stabilization loan”. That’s right; finally some bailout money goes into the hands of the small business owner, instead of going down the proverbial deep hole of the stock market or large banks. But don’t get too excited. It is limited to very specific instances and is not available for vast majority of business owners.There are some news articles that boldly claim the SBA will now provide relief if you have an existing business loan and are having trouble making the payments. This is not a true statement and needs to be clarified. As seen in more detail in this article, this is wrong because it applies to troubled loans made in the future, not existing ones.Here is how it works. Assume you were one of the lucky few that find a bank to make a SBA loan. You proceed on your merry way but run into tough economic times and find it hard to repay. Remember these are not conventional loans but loans from an SBA licensed lender that are guaranteed for default by the U.S. government through the SBA (depending upon the loan, between 50% and 90%). Under the new stimulus bill, the SBA might come to your rescue. You will be able to get a new loan which will pay-off the existing balance on extremely favorable terms, buying more time to revitalize your business and get back in the saddle. Sound too good to be true? Well, you be the judge. Here are some of the features:1. Does not apply to SBA loans taken out before the stimulus bill. As to non-SBA loans, they can be before or after the bill’s enactment.2. Does it apply to SBA guaranteed loans or non-SBA conventional loans as well? We don’t know for sure. This statute simply says it applies to a “small business concern that meets the eligibility standards and section 7(a) of the Small Business Act” (Section 506 (c) of the new Act). That contains pages and pages of requirements which could apply to both types of loans. Based on some of the preliminary reports from the SBA, it appears it applies to both SBA and non-SBA loans.3. These monies are subject to availability in the funding of Congress. Some think the way we are going with our Federal bailout, we are going be out of money before the economy we are trying to save.4. You don’t get these monies unless you are a viable business. Boy, you can drive a truck through that phrase. Our friends at the SBA will determine if you are “viable” (imagine how inferior you will be when you have to tell your friends your business was determined by the Federal government to be “non-viable” and on life support).5. You have to be suffering “immediate financial hardship”. So much for holding out making payments because you’d rather use the money for other expansion needs. How many months you have to be delinquent, or how close your foot is to the banana peel of complete business failure, is anyone’s guess.6. It is not certain, and commentators disagree, as to whether the Federal government through the SBA will make the loan from taxpayers’ dollars or by private SBA licensed banks. In my opinion it is the latter. It carries a 100% SBA guarantee and I would make no sense if the government itself was making the loan.7. The loan cannot exceed $35,000. Presumably the new loan will be “taking out” or refinancing the entire balance on the old one. So if you had a $100,000 loan that you have been paying on time for several years but now have a balance of $35,000 and are in trouble, boy do we have a program for you. Or you might have a smaller $15,000 loan and after a short time need help. The law does not say you have to wait any particular period of time so I guess you could be in default after the first couple of months.8. You can use it to make up no more than six months of monthly delinquencies.9. The loan will be for a maximum term of five years.10. The borrower will pay absolutely no interest for the duration of the loan. Interest can be charged, but it will be subsidized by the Federal government.11. Here’s the great part. If you get one of these loans, you don’t have to make any payments for the first year.12. There are absolutely no upfront fees allowed. Getting such a loan is 100% free (of course you have to pay principal and interest after the one year moratorium).13. The SBA will decide whether or not collateral is required. In other words, if you have to put liens on your property or residence. My guess is they will lax as to this requirement.14. You can get these loans until September 30, 2010.15. Because this is emergency legislation, within 15 days after signing the bill, the SBA has to come up with regulations.Here is a summary of the actual legislative language if you are having trouble getting to sleep:SEC. 506. BUSINESS STABILIZATION PROGRAM. (a) IN GENERAL- Subject to the availability of appropriations, the Administrator of the Small Business Administration shall carry out a program to provide loans on a deferred basis to viable (as such term is determined pursuant to regulation by the Administrator of the Small Business Administration) small business concerns that have a qualifying small business loan and are experiencing immediate financial hardship.(b) ELIGIBLE BORROWER- A small business concern as defined under section 3 of the Small Business Act (15 U.S.C. 632).(c) QUALIFYING SMALL BUSINESS LOAN- A loan made to a small business concern that meets the eligibility standards in section 7(a) of the Small Business Act (15 U.S.C. 636(a)) but shall not include loans guarantees (or loan guarantee commitments made) by the Administrator prior to the date of enactment of this Act.(d) LOAN SIZE- Loans guaranteed under this section may not exceed $35,000.(e) PURPOSE- Loans guaranteed under this program shall be used to make periodic payment of principal and interest, either in full or in part, on an existing qualifying small business loan for a period of time not to exceed 6 months.(f) LOAN TERMS- Loans made under this section shall:(1) carry a 100 percent guaranty; and(2) have interest fully subsidized for the period of repayment.(g) REPAYMENT- Repayment for loans made under this section shall–(1) be amortized over a period of time not to exceed 5 years; and(2) not begin until 12 months after the final disbursement of funds is made.(h) COLLATERAL- The Administrator of the Small Business Administration may accept any available collateral, including subordinated liens, to secure loans made under this section.(i) FEES- The Administrator of the Small Business Administration is prohibited from charging any processing fees, origination fees, application fees, points, brokerage fees, bonus points, prepayment penalties, and other fees that could be charged to a loan applicant for loans under this section.(j) SUNSET- The Administrator of the Small Business Administration shall not issue loan guarantees under this section after September 30, 2010.(k) EMERGENCY RULEMAKING AUTHORITY- The Administrator of the Small Business Administration shall issue regulations under this section within 15 days after the date of enactment of this section. The notice requirements of section 553(b) of title 5, United States Code shall not apply to the promulgation of such regulations.The real question is whether a private bank will loan under this program. Unfortunately, few will do so because the statute very clearly states that no fees whatsoever can be charged, and how can a bank make any money if they loan under those circumstances. Sure, they might make money in the secondary market, but that is dried up, so they basically are asked to make a loan out of the goodness of their heart. On a other hand, it carries a first ever 100% government guarantee so the bank’s know they will be receiving interest and will have no possibility of losing a single dime. Maybe this will work after all.But there is something else that would be of interest to a bank. In a way, this is a form of Federal bailout going directly to small community banks. They have on their books loans that are in default and they could easily jump at the chance of being able to bail them out with this program. Especially if they had not been the recipients of the first TARP monies. Contrary to public sentiment, most of them did not receive any money. But again, this might not apply to that community bank. Since they typically package and sell their loans within three to six months, it probably wouldn’t even be in default at that point. It would be in the hands of the secondary market investor.So is this good or bad for small businesses? Frankly, it’s good to see that some bailout money is working its way toward small businesses, but most of them would rather have a loan in the first place, as opposed help when in default. Unfortunately, this will have a limited application.Wouldn’t it be better if we simply expanded our small business programs so more businesses could get loans? How about the SBA creating a secondary market for small business loans? I have a novel idea: for the moment forget about defaults, and concentrate on making business loans available to start-ups or existing businesses wanting to expand.How about having a program that can pay off high interest credit card balances? There is hardly a business out there that has not been financing themselves lately through credit cards, simply because banks are not making loans. It is not unusual for people to have $50,000 plus on their credit cards, just to stay afloat. Talk about saving high interest. You can imagine how much cash flow this would give a small business.We should applaud Congress for doing their best under short notice to come up with this plan. Sure this is a form of welcome bailout for small businesses, but I believe it misses the mark as to the majority of the 27 million business owners that are simply looking for a loan they can repay, as opposed to a handout.

March of the Green Technology

Technology has been defined in several ways. The simplest is the knowledge of using tools and techniques to improve the working condition, organizational management and artistic perspective in order to improve the efficiency of product, machine or human efforts. The primitive man is known for intelligent use of stone to convert it into weapon and shelter houses. The use of animal skin and bark of trees for covering body was a step towards fabric technology. The knowledge of technology to control the fire radically changed the status of man learning to add new items in his food menu and getting warmth in a cold climate. The wheel has brought us to the present state of global conveyance Flinging of leg bones into the space after a good and hefty meal inspired space odyssey. Information technology spear headed by internet has its origin in smoke signals and more recently to printing presses. Now we have industrial, educational, information, medical, visual, micro, nano, and domestic technology to name a few.Technology is not singularly applied by human kind to give impetus to his objectives. The animals and birds have also excelled in carving out technological wonders comparable and sometimes better than us. The nest of the weaving birds, signals from dolphins, breaking of coconut shells by monkeys, domestic technology of ants, technology of descent from an acute slope by elephants, migration of birds to places akin to their need and requirements, waiting for air to become hot before taking to a flight by kites and other heavy size birds and dropping of stone pallets to raise the water level in a narrow necked pitcher by crows are some to refresh the memory. Look towards the sky in the evening. You shall find ducks flying in inverted V formation, giving others the advantage of vacuum and stream line motion.There is a difference in how the primates of yester years behaved, how animals and birds around us make use of the technology and how we are using it. The difference is great. Their efforts were and are always in improving their living condition compatible to the environment. Our efforts are diversified in many ways. Some are good, some are bad and some are ugly. Lately, with the onset of industrial revolution, we have mostly added to pollution load of the environment or developed weapons of mass destruction. Technology which used to improve machine efficiency has focused its attention to human efficiency. We call it productivity. We pretend to exploit it as outsourcing. Green technology had no option but to introduce it and take charge of the entire state of affairs created by the human kind.Green technology targets for an appropriate, equitable and sustainable environment by interlacing all known technologies and human involvement with environmental science to conserve and upgrade the environment and bringing it back to the quality available some 300 years back. Green technology could be termed as a refinement in the available technology in as much as, it helps in managing pollution of all kinds in such a way that these turn out to be ecological and economically friendly.Technologies that are green are rated by their carbon footprints. A competitive and successful green technology has a low set of greenhouse gas emissions from persons, product, process, event or organization. There are two ways to achieve the objective. The first which may be termed as green acts, is to recycle the waste, reuse through reconditioning and other alternatives, reduce resource consumption and to conserve available natural resources. The second which is creating a green conditions, is to evolve technologies that reduce greenhouse gas emissions thus reducing carbon footprint. These measures have proven effect on global warming reduction.The first category of green technology is to encourage and redefine the conventional ways of keeping carbon footprints at a low level. These are recycling and its extension to water and air purification, solid waste treatment including sewage treatment.Recycling defines environment by conservation at its best. Used materials generally thrown as waste is recycled into new products. Composting is an age old concept of recycling green waste into manure. Recycling plastic waste into new plastic products is most prevalent now. Recycling reduces fresh raw material consumption by utilizing middling and scraps. It reduces wastage of energy that is required to convert fresh raw material into end products It reduces air pollution as waste is now recycled instead of incineration. It reduces water pollution as there is less land filling thus reducing leachate reaching water bodies.Waste water is purified by chemical, mechanical and biological processes to convert it into drinking and other usage. Air is purified both in industries as well as places of human habitation in closed spaces. Industrial air pollutant such as Sulfur oxides gives back Sulfuric acid, particulates such as fire ash is converted into cement and bricks. Solid waste generation from human habitat is segregated into bio-degradable and non-bio-degradable waste. Bio-degradable waste is composted into manure and bio-fuel. Non-bio-degradable waste is further separated into metal, glass, plastic etc. The first three are used as intermediate raw material and recycled into the production pipeline to get useful products. Hazardous waste materials are suitably treated to non-hazardous entity and then most of these are also recycled. Sewage treatment has acquired a state of the art technology. It is treated to make it free from parasites, bacteria, fungi, algae and viruses. Treated solid waste is used as manure and the treated waste water is either used for irrigation or further treated to make it fit for domestic use.Green technology that creates and sustains green condition has focused its attention primarily on renewable energy resources. Renewable energy such as solar, wind, tidal, nuclear and geothermal have been identified as having minimum greenhouse gas emission and has tremendous potential to replace the conventional energy providers such as fossil fuel and petroleum. The latter are non renewable energy resources that are major pollutants and major reasons for greenhouse gas emissions.Green products are a category in itself as it has both the properties of reducing greenhouse gases and replacing highly polluting non-renewable energy resources. Fuel cells are one example. It eliminates air pollution from automobiles and it replaces hydrocarbon fuel. Plastic cement manufactured from waste plastic bottles is another example. This product takes less energy for its preparation than the conventional cement manufactured from iron slag, lime and sand. Moreover, this plastic cement has more permeability and hence can breathe better. Rain water can filter through surfaces prepared from it and hence enrich the water table beneath.These days, market is getting flooded with toxic plastic toys which are highly injurious to the delicate and tender toddlers. These are being replaced by toys made from recycled plastic bottles. The latest innovation in this segment is fabric made from used plastic bottles material. Dress material for Cricket India members are made from this fabric.Green technology is catching fast the computer software segment too. Now there is software which shall alarm you from wastage of electricity while you are in your home or at the other side of the globe.There has been a lame excuse floating around that shifting to green technology requires too much research and development and the cost of implementation is very high. It may be appropriate for some such endeavors such as technology for geothermal energy usage. It is also argued that it takes lot of time to break even. Here, people fail to compare such logic with technologies that are in use and later revised to green technology. An instance in case is the steam engine which saw transition to diesel engine and now almost replaced by electric engines and in near future with electromagnetic induction forces and magnetic forces. A time cycle would show that invention and commissioning of coal driven steam engine took a far longer maturing time than electric engine or the future versions. All such transformations are far too profit friendly. Break-even time has also been quite low.You may expect wonders in the future with the advent of nano technology. Imagine a chip grafted in your brain to replace computers which are one of the major consumers of electric energy and are generating huge electronic waste. You should start dreaming of recharging your space vehicle with universally available solar energy replacing high cost, highly pollutant and heavy weight, cryogenic fuel. You may have the pleasure of travelling in identified flying objects to several light year distant part of the universe.Green technology is marching towards a future that has a future.