What I really like about personal finance is that there are no straight forward answers. Each financial product has its pros and cons. While several people debate the usage of payday loans I think that sometimes, it could be a good *temporary* solution.

In order to have a clearer point of view on Payday Loans, I thought of reviewing their pros and cons. While you can get your money in no time, there are little bit more to know before you apply for a guaranteed payday loan:

Pros of Payday Loans:

Getting your money quickly

Obviously, the biggest advantage of applying for a payday loan is to get your money faster than your pay check. Most companies are able to give you access to your money within 24 hours. When you are in the need of money, this is quite useful.

Gives you a break to find a better financing option

As I previously mentioned, payday loans can give you a quick option to access to money. This will give you additional time to find a better financing option (maybe try a 0% apr balance transfer credit card or a consolidation loan?).

Skip late fees

If you are about to pay fees because you are late on your bills, applying for a payday loan can be a good solution. Sometimes, the late fees are higher than the payday loan fees. Therefore, you would *save* money in your transactions.

No need to supply excessive amount of documents

Payday loans companies try to keep it as simple as possible. Therefore, you don’t have to fill a ton of paperwork to access your money.

Cons of Payday Loans:

It is expensive

Interest rate and late payment fees on such loans are exorbitant. If you apply for a payday loan, you better have a plan to pay it back before you get the money. If not, you may regret your decision when you look at how much it has cost you .

Not using the money for the right purpose

Some people use this option to get money quickly but don’t think about the long term consequences. This is not free money, this is money taken from your future pay check. Therefore, if you don’t use it as a temporary financing tool, you will definitely end-up into bigger financial problems.

Loan cap

Depending on where you live and the size of your pay check, you can have a loan cap that goes from $300 to $1500. Therefore, if you need additional funding, you are better off looking at other financing options.

This post was provided by Online Cash Advance

The total debt-servicing ratio (TDSR) is used by most banks to qualify their clients for loans and such. Most likely you wonder how they calculate it.

The first thing you need to take into account is your monthly income. Banks work with gross income. Business owners who are self employed tend to have a higher debt ratio. They can write off expenses that permanent employees cannot. Their gross, or declared, income is lower than those who aren’t self-employed.

If you benefit from multiple sources of income such as investments, interests, dividends, capital gains, rental incomes and what not, you might want to use your Notice of Assessment to demonstrate your total taxable income to a bank for getting a loan. You divide this by twelve to figure out its contribution to your monthly income. If you get paid every week, multiply it by 52 then divide by twelve to determine your monthly income. This will be more accurate than multiplying your pay stub by four (and somewhat higher as well).

Next, in order to determine a ratio, you need to calculate your debts. Financial institutions are only interested in your financial obligations: rents, mortgages, loans, lines of credit, alimonies, car leases and credit cards. You don’t count your bills—your telephone bill, cell phone, electricity or any other type of bill as part of your debts.

Your rent will be calculated even if you live with your parents and they don’t charge you. Depending where you live, the area minimum could be something like $500 or $1000 a month. If you own property, full mortgage payment plus property taxes are factored in as debt. Personal loans, car leases and alimonies are taken at their full monthly payment. When considering lines of credit and credit cards, most institutions will calculate based on 3 percent of the total balance you carry. Some banks might weigh your available limit if you have substantial credit card account, because you have the ability to make this money available to yourself any time you want.

One you complete those steps, you should know the following: your monthly income, and your spouse’s monthly income, and therefore your total household income.

You should also know your mortgage payment, you municipal and school taxes, fifty percent of your heating costs, your car leases or loan payments, three percent of your credit card balance, three percent of your available line of credit, and your total monthly payment. Add it up; is your total debt.

Once you know all that, you can calculate the TDSR simply by diving your outgo by your income. That’s all ‘ratio’ means, by the way—the relationship of one thing to another as part of a whole, or as a percentage.

A pay day loan is, simply put, a small short term loan intended to cover your expenses until your next payday. These loans are sometimes called paycheck advance, payday advance, or cash advance. It can be a bit confusing to call it a cash advance, however, as typically, a cash advance is cash borrowed against a prearranged line of credit like a credit card. Legislation regulating pay day loans varies widely from country to country and within the United States varies widely from state to state.

Sometimes there are strict usury limits that limit how much interest any lender including those who provide pay day loans can collect. Some places outlaw pay day loans. Other places, on the other hand, hardly regulate pay day loans at all. Pay day loans are extremely short term so the difference between the expressed annual percentage rate and the effective interest rate can often be quite substantial. If you are considering a pay day loan, you must find out whether the interest is expressed as annual percentage rate (APR) or effective annual rate (EAR).

Pay day loans can be gotten from retail lending outlets. The borrower visits the lending outlet and takes out a small cash loan, and payment is due in full at the next paycheck. The term is typically two weeks. IN the US, finance charges on pay day loans are usually in the range of 15 to 30 percent of the amount for the two week period. This translates to an APR of 390 to 780 percent if it were a long term loan. Generally, the borrower will write a post dated check to the lender in the full amount of the loan plus interest. When the loan is due, the borrower returns to pay in person. If they don’t, the lender can put the post dated check through or electronically withdraw money from the borrower’s bank account to pay for the loan.

If the borrower doesn’t have the money to cover the check, the borrower may be looking at insufficient funds (NSF) fees from their bank, as well as the cost of the loan. The loan may incur additional fees and an increased interest rate as a result of failure to pay as well. If customers cannot pay, an extended payment plan may be available. Some states require extended payment plans by law.

Payday lenders require borrowers to bring pay stubs to show that they have a steady source of income. The borrower must also provide recent bank statements. Individual companies may have their own criteria, however.

Payday loans are often marketed online. These work by having the consumer fill out an online application with their information and a copy of a check and other info.

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Many young couple dream to have their first property and become homeowner. However, when it comes down to request a mortgage in order to buy the dream of their life, they are left in the hand of the “evil” banker

They don’t really know what to expect, which question to ask and how to negotiate their mortgage (and what to negotiate because there is much more than only negotiating your rate!). This post is about what banks consider before lending money for a mortgage. Therefore, you will be in a better position to get approved for a mortgage after reading this article (hopefully!).

Cash down

One of the very first things to look at is your cash down to buy a property. If you can’t save money aside to purchase a property, you simply can’t afford to buy one. House maintenance, municipal and school taxes, mortgage payment, house renovations and other expenses will be added to your budget.

You can usually start with a 5% cash down (if you want to buy a property of 200K, you need at least 10K cash) if you have decent debt ratio which is our second point.

Total Debt Servicing Ratio (TDSR)

This big name result in a simple mathematic operation: the total of your monthly financial obligation (car lease, personal loan, 3% of the balance on your credit card and line of credit, taxes, mortgage payment, etc.) divided by the total of your declared income.

Depending on the financial institution, this rate should not exceed 40% with your new mortgage payment. You can play around and negotiate, but if you take 40% as a maximum TDSR, you won’t get any surprises.

Credit history

No wonder a bank won’t give you the biggest loan of your life is you are a bad customer Your Beacon (Fico) Score will be the first indication of your credit behaviours. Than, they will look deeper in your credit report to make sure everything is in order. In the end, if your credit cards are not maxed out and you pay your bills on time, you should be worried.

Net worth

Your net worth is not the most important part of your credit application for a mortgage, but it is a good thing to keep it positive. A fast way to calculate it is to take your financial assets (bank account, registered and non registered investments, property and your car with a very small value). You don’t include clothes, painting, furniture or anything else that doesn’t have a “real” value. Then, you withdraw your debts (credit card and line of credit balance, personal loan, student loan, mortgage). Remember, a lease does affect your TDSR but not your net worth as you are not the owner of the good. As long as your net worth is positive, you should not encounter any problem applying for a mortgage.

The first 3 points are definitely the most important when it comes down to get a mortgage. You need to prove your ability to save money, that you are not too much indebt and that you paid your bills in the past.

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Without any language in a loan contract to the contrary, a guarantor has certain rights by law in their relationship with the creditor. Because the laws vary from state to state, it is best to specify the steps the creditor has to take in order for the guarantor to be responsible for the debtor’s commitments. The agreement should state whether and to what extent the creditor must first pursue all other available options before going after the guarantor.

A guarantor is someone who agrees to be responsible for the payment of someone else’s debt. The guarantee is the written promise by the guarantor that the borrower will meet the terms and conditions of the loan agreement. The guarantee is not just a formality so that a friend or relative can get a loan, its’ a big responsibility. It shows you are prepared to pay if the debtor or borrower does not pay. You may be expected to pay the credit provider all the money the borrower owes under the contract on demand, or risk being sued by the lender, even in some cases without having them sue the borrower! This may seem absurd, but remember, you’re the one with the money.

Most people assume the best of the person they cosign for, but you may find that whatever their intentions they may not be able to meet the terms and conditions of the credit contract for some reason or another. You must be prepared to meet your obligation to pay under that circumstance.

Sometimes guarantors can escape an obligation by demonstrating that they didn’t know what they were getting into. Lenders have learnt from this and chances are any guarantee you sign now will be enforceable.

You do, of course, have certain rights. You can specify to the lender that you will only be a guarantor if you can limit the guarantee to a specific amount of money or time period. If the lender feels this is insufficient, they may refuse the borrower the loan, however. Limit your guarantee to the amount lent and the interest and recovery costs and exclude any further advances put forth to the debtor.

The lender will let you know whether the loan requires you to guarantee as secured or unsecured. An unsecured guarantee means the lender doesn’t require any of your property as collateral before giving you a loan. A secured guarantee means you have to give them a lien on some property of yours in order for your borrower to get the loan.

If the borrower fails to pay on time, you as guarantor are responsible for fixing that. That could involve you paying the entire loan off. Be careful when you sign on as a guarantor, as your rights are limited.