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What is Debt Financing?

When a company needs to pay for something, it can pay with cash, or it may finance the purchase. Financing means that it gets the money from other businesses or sources, in return for obligations. Companies that are short on cash may need financing to pay for short-term needs or long-term capital expenditures.

There are two kinds of financing—debt financing and equity financing.

Equity financing means the company raises money by selling ownership shares in the business.

Debt financing happens when a company gets a loan and promises to repay the loan over time, with interest. Debt financing can come from a lender’s loan or from selling bonds to the public.

Loans usually require the borrower to offer collateral to guarantee repayment. This is called a secured loan. If the borrower defaults on a secured loan, the lender can take the collateral as repayment.

Various assets may be acceptable as collateral. For example, accounts receivable, real estate, equipment, securities, mortgages, inventory and merchandise might be acceptable to the lender. Having other people or companies sign as guarantors or endorsers may also work to secure a loan.

Selling bonds or commercial paper in the capital markets is another way to raise money through debt financing. This may at times be more economical or easier than taking a bank loan.

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This personal loan has benefits for you!

Banks offer overdraft facility against bank fixed deposit. This enables borrowers to have access to liquidity. The borrower can use funds for short period of time and repay the money much before the last date.

This way s/he pays interest only for the time s/he has availed cash from the bank.

For example, assume that an individual has a fixed deposit of Rs 1 lakh. Bank has approved credit limit of Rs 90,000 against this FD and the tenure is 15 months. If s/he draws Rs 50,000 on first of the month and then repays the money on the 17th of the month, then s/he is supposed to pay the interest on Rs 50,000 availed for 17 days only.

The points to note while you take loan against fixed deposit is that it should be free from lien or encumbrance and the deposit should not be in any minor’s name.

If this deposit is in joint name, say of husband and wife, all holders of the deposit have to execute the loan document. The liability to repay the loan will lie with all holders of the deposit.

The deposit holder will continue to receive interest on the underlying deposit, however, they have to service the EMI on the loan against deposit.

Personal loan against fixed deposit can help you in times of liquidity crunch. However you should be looking at it as a means to raise short term money.

If you go overboard with a personal loan against fixed deposit, and cannot repay on time, you stand to lose your bank fixed deposit, as the bank forecloses the bank fixed deposit to recover money lent.

Also it shows in your credit report, popularly known as CIBIL report. Such defaults can pull your CIBIL score down. So use the facility of raising personal loan against bank fixed deposit responsibly.

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Top Tips for Payday Loans | Rogerrocco.com

These top tips when it comes to payday loans are designed to help you through hard times. Payday loans are becoming increasingly popular as more and more people find they need a little extra help to get from one month to the next. Whether you have a big bill to pay or whether you simply feel like treating yourself, payday loans are a fabulous short term solution as long as you follow these tips to success.

Know what is expected

The first thing you need to know when it comes to payday loans is what you are expected to do. You need to make sure that you know the protocol and you know how you will meet the payment plans. You will need to pay your loan back within a specific time period with added interest and the clearer the terms and conditions are, the easier this will be.

Select a low interest rate

Another great tip when it comes to payday loans is to choose a company offering payday loans with low interest rates. The lower the interest rates the better the deal and you shouldn’t be afraid to shop around and to compare the best deals on the market.

Borrow what you need

Never borrow more than you need when it comes to payday loans or you could just fritter it all away which won’t make for a wise investment. You should work out how much you need and apply for this amount to avoid getting yourself into sticky debt.

Make a plan

Make a plan when it comes to payday loans so you know exactly how you will repay the loan without selling yourself short for the rest of the month. Good organization and budgeting is crucial when it comes to payday loans.

This entry was posted in Uncategorized on May 3, 2014 by . […]

CFPB: Payday loans not so short-term after all – CreditCards.com

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When strapped for cash and hit with an unexpected bill, some people may feel as if they have no other choice but to turn to a payday lender. But new research from the Consumer Financial Protection Bureau shows that taking out one of these short-term loans could just sink you deeper into debt.

For a price, payday lenders offer small, unsecured loans (usually no more than $1,000 at a time) that, in theory, are supposed to be paid off when you get your next paycheck. Typically, payday lenders charge approximately $10 to $20 for every $100 borrowed and charge a fee every time the loan is rolled over.

But according to a new report, released March 25 by the CFPB, most people who take out high-interest payday loans can’t afford to repay the loan in full when their paycheck comes through. So they wind up rolling the loan over from month-to-month, like a credit card. And, in some cases, they roll the debt over so many times that they eventually owe more in fees than they borrowed in the first place.

“Many consumers would never dream of paying an annual percentage rate of 400 percent on a credit card or any other type of loan,” said CFPB director Richard Cordray in prepared remarks. But some consumers will bite the bullet for a payday loan, he said, because they mistakenly think they can quickly repay the loan as soon as they get paid.

“For consumers in a pinch, getting the cash they need can seem worth it at any cost,” he said. The problem is too many consumers find they can’t break free that quickly. So they take on additional loans and sink even deeper into debt.

“Our study today again confirms that payday loans are leading many consumers into longer-term, expensive debt burdens,” Cordray said. And that’s taking a toll on “short-term” borrowers. “The stress of having to re-borrow the same dollars after paying substantial fees is a heavy yoke that impairs a consumer’s financial freedom.”

Inside the study
The CFPB studied more than 12 million loans taken out at storefront payday loan shops around the country and analyzed how they were used over the course of 12 months.

Among the study’s key findings:

Borrowers keep coming back. Eighty percent of all payday loans, for example, are either rolled over to the next month, or they’re renewed within a few weeks. That means that consumers who take out the payday loans are holding them for much longer than originally intended. “The core payday loan product was designed and justified as being expressly intended for short-term emergency use,” said Cordray in his prepared remarks. But instead, most payday loans last for months — and sometimes even longer, according to the CFPB.The fees add up quickly. More than half of all payday loans end up being renewed or rolled over so many times that consumers wind up repaying at least twice the amount they originally borrowed. That’s because the fees associated with payday loans are often so high that they end up costing as much as the loan itself. “With a typical fee of 15 percent, consumers who take out an initial loan and six renewals will have paid more in fees than the original loan amount,” said the CFPB. Payday loans are hard to escape. When consumers roll over their loans from month to month, the loan amounts grow quickly, thanks to the hefty interest consumers are charged. As a result, many payday borrowers wind up with a lot more debt than they can afford to repay. According to the CFPB, more than 80 percent of all repeat borrowers end up borrowing the same amount or more than they borrowed the previous month. A large percentage of borrowers, meanwhile, are mired in so much debt that they become “trapped” by it, said the CFPB. That’s especially true for borrowers who are on a fixed monthly income. For example, 20 percent of payday borrowers living on a fixed income — such as elderly borrowers living off Social Security — were in debt for at least 12 months.

Your bottom-line
Avoid turning to a payday loan company to solve a temporary cash-flow problem. If possible, consider borrowing from a friend or family member, selling something of value or taking on extra work. Getting stuck in the payday debt cycle is something you want to avoid at all costs.

If you have a complaint about a specific payday loan company, you can submit your complaint to the CFPB online or by calling 1-855-729-2372.

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Payday Loans: Part 1 | Brant Haldimand Norfolk Community Legal …

What is a payday loan?

A payday loan allows you to quickly borrow cash that you promise to repay when you get your next paycheque or your next social assistance, disability, pension, or other regular income payment.

Who are payday lenders?

Payday lenders are businesses that give loans to people who cannot get a loan from a bank or credit union. They usually charge much higher interest and fees than banks and credit unions.

You can often find them in strip malls and other store-front offices. Some payday lenders offer their services over the Internet. They often have the words “cash” or “money” in their names.

Payday lenders may offer other services too, like buying gold or cashing cheques. However, they cannot force you to use these other services in order to get the loan. They cannot offer you other services while you are in the process of getting a loan from them.

Payday lenders must be licensed. The Ontario Ministry of Consumer Services gives licenses to approved payday lenders. The license must be clearly displayed in the store or on the website.

How does a payday loan work?

Payday loans are loans that you agree to repay in a short time, usually 14 to 28 days, but no more than 62 days. The most money you can borrow in a payday loan in Ontario is $1,500.

Payday lenders cannot ask you for “collateral” or for someone to be your “guarantor”. They usually want proof that you have a regular income, a bank account, and a permanent address. A lender is allowed to call your employer to confirm details of your employment. They are not allowed to contact anyone else about your loan.

What must lenders tell me before I get a payday loan?

Any advertisement containing information about a payday loan must tell you:

The most interest and fees that they can charge you legally for the loan, which is $21 for every $100 you borrow, When you must repay the loan, The total amount you must repay, and What it would cost to borrow $300.

How do I repay the loan?

Usually the lender will want your to repay the loan with either a preauthorized debit form, which takes money directly out of your bank account on the agreed date, or a postdated cheque from your regular bank account. You sign the cheque with the date in the future that you expect to have money in your account. The payday lender will cash the cheque on that date.

A payday lender cannot take your pay directly from your employer to repay the loan. This means they cannot ask you to sign a “wage assignment” or other document that would let them take your pay.

You can repay a loan at any time before it is due. You still have to pay the interest and fees you agreed to, but the lender cannot charge you extra for repaying the loan early.

Next month, we’ll talk in more detail about payday loans and what to do if you change your mind, can’t repay the loan, or have problems with the payday lender.

Getting legal help ~ Community legal clinics
For legal help or advice, consumers can contact their local community legal clinic.

Printed from CLEO ~ Community Legal Education Ontario: “Consumer Law Series: Payday Loans”

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Payday Loans Give Employed People an Opportunity to Access …

Payday loans are not a new form of credit. They have been available to consumers for many years. Licensed private lenders are authorised to offer short term loans to employed people who are earning a regular wage.

If you find yourself short of cash and it is still a short while until you are paid, a Payday loan may be a form of credit you can use to help you. To find out if this is a loan that you are eligible to apply for, simply go online and do some research to find a reputable lender. Once you have identified the lender you wish to work with, take some time to find out the terms and conditions of the payday loan.

If you are over eighteen, in employment, and receiving a regular wage into an active bank account, you will be eligible to apply. In your application, you should add all the correct details of your name, date of birth, address and full employment details. You will also need to provide your bank account details.

Most good payday lenders will process an application very quickly, often successful applicants will receive a response to their application within the hour, and for most applicants, the funds will be transferred into a bank account within the hour too.

Payday loans are an excellent way to access funds for a short period of time. They are useful if you do not want to use a credit card, or go overdrawn at the bank. They are also excellent if you are not keen on committing to a long term bank loan.

Before you apply, you should take care to calculate how much you can afford to borrow, and only borrow an amount you know you will be able to repay fully, when you are next paid. If you are struggling on a low income, or have long term debt problems, Payday loans may not be the best option for you. Please think very carefully before committing to any form of credit and if you need to, get advice from a credit adviser.

Being short of cash in an emergency can be an extremely stressful situation, and for many people, the stress can cause them to rush in to making a decision about credit. Try not to do this. Instead, carefully consider your options, and ask the lender for all the information you need so you can make an informed decision. The best lenders will be happy to answer your questions and help you with the application, and they will not pressure you to borrow money.

The majority of customers who use Payday loans choose them because they offer a different choice and level of flexibility compared to the other standard forms of credit like long term loans or credit cards. For employed people, it can be a huge help if they are really short of cash until they are paid in a week or two.

If your application is successful, you will receive notification very quickly. Then the money will be transferred in to your account for you to use as required. Sometimes this can all be done within an hour. The repayment date is usually set on the day your wages arrive in the bank. Make sure you only borrow an amount you can afford.This will help to ensure you are not short of money the following month.

It is best to repay the loan in full on the agreed date. Delaying the payment of your loan, or deferring it can make it an expensive credit option. Payday loans are not designed to last for many months and the interest rates could make the loan expensive if you do not repay the amount owed when agreed.

If you are considering this form of credit and want more information, contact your lender and ask the relevant questions.They will help you decide if a Payday loan will be the best solution for you in a financial emergency.

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Payday Loans: Learn Your Rights and Responsibilities

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Payday loans are a convenient way to quickly acquire needed cash however it is important to educate yourself about your rights and responsibilities before you apply for a

payday advance loan

. During the repayment period it’s also important to understand your responsibilities and the difference between collection and harassment from the loan provider.

Advance payday loans usually allow a person to borrow between one hundred and one thousand dollars unsecured upon the agreement you will repay the loan in lump sums usually direct debited from the borrowers’ bank account. Advance payday loans are easy to apply for; where a person only needs to fill out an application online, provide bank details, photo identification and confirm all information in the application is correct with the loan lender.

Your responsibilities about repayment

Once you have reached the repayment period you must repay the loan and the agreed fees or interest of the loan, usually this is by agreed direct debit. If you do not repay the loan amount the lender has the right to contact the person to arrange repayment. Should a direct debit fail or the borrower has unauthorized the direct debit not only can the individual incur fees by their bank but also be in breach of their original loan agreement.

Your rights about repayment

If you have agreed to a payday loan contract you have the right to enquire about a reduced repayment method should you not be able to meet the agreed repayment loan amount. A lender can contact an individual about repayment however lenders must not contact the borrower more than three times a week, must not frighten or make threats towards the borrower. Should this incur the individual has the legal right to report the lender for harassment. A lender can also only contact borrower’s between reasonable hours, usually business hours.

What can happen if you refuse to repay an advanced loan

If for any reason a borrower fails or refuses to repay an advanced loan a lender has the right to take the matter to small claims court if a repayment cannot be agreed upon. If the lender takes the matter to small claims the borrower may also be responsible for the lenders legal fees, however in some circumstances the lender may not take the borrower to court if the loan amount is small. If the original loan agreement was for an unsecured loan the lender cannot reposes items such as furniture, protected items under the law, however if the borrower has reliable income the court may garnish wages until the loan amount if repaid in full. If the borrower is not working and reliant upon welfare a court will not force a borrower to sacrifice welfare income as welfare is strictly for living expenses only does not cover debt repayment. If you are reliant upon welfare you can refuse to repay the loan until you are receiving a working income.

Responsibilities of the lender

A lender is responsible to make the terms of the loan agreement clear to the borrower as well as post any legal warnings on the website which can be accessed before applying for a loan. In Australia lender’s must include an FTC warning about borrowing disclaimer on the website. When applying for a loan, explore you are applying with a responsible lender that provides a warning about borrowing FTC legislated statement on the website.get now

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Tower Loans Review – Up to $1000 Quick Loan Online. We offer …

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You will need to repay the loan quantity and also the awareness accrued on the pay back date while laid out in the credit arrangement. The actual pay back time is often your own payday, and so the name payday advance.The settlement will likely be obtained from the loan provider by simply debiting the considen anyone signed up in the application, the ing account into which you buy your salary paid out.

Visit the Best Lender Online at Tower Loans Review […]

Payday Loans and How to Qualify Easily | quick payday loans

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Can you qualify for a

cash advance loan

? Let us explore the hypothetical you and a situation in which there is a need. Perhaps you have unfortunately run into a situation where you could use a little financial help to get you over a bump in the road. Almost everybody will at some point in time need a short-term loan for an unexpected occurrence. If you have found yourself in that position, you have probably been looking at your options. Luckily, if you live in a state that offers business licenses to cash advance loan offices, you can potentially get some assistance. The good news is there are not too many requirements in most states. Usually you need to prove your identity, show the ability to repay the loan, and be willing to pay the fees to the cash advance loan office. Once you go through the basic qualifications noted here, you should feel confident about your ability to obtain some short term financial help.

You have confirmed to yourself you are in need of a cash advance loan for a short term and are unable to borrow the money from friends or family. While starting the process of applying for the loan, you will check the requirements on the office’s website, but the underlying requirement is proof of identity. So as long as you are able to prove who you are you with proper government issued identification and a verified bank account, you will probably be approved. Now that you have determined the need and the ability to prove your identity, the next step will be to verify the ability to repay the loan. To get you through until your next payday you need a little financial help, and you are now satisfied that you can prove your identity and bank account to the cash advance loan center. The next hurdle is to show proof of your ability to repay the loan over the next paycheck or two. Sometimes the center may not be too intrusive into this because it can make extra money by extending or refinancing the loan. The last thing you will want to do is to extend the loan and keep adding fees to the balance, though. While you are thinking about the fees the cash advance loan center is charging, you will want to keep in mind that the business is filling a niche in the lending market that banks will usually not service. Put in an easier-to-understand way, there is a lot of risk in the lending that these companies do, and for them to stay in business the reward has to equal the risk. Now you are in a hypothetical situation where you need a short-term loan for a financial hiccup and are researching getting a cash advance loan but want to make sure that you qualify for the loan. You know that you can prove your identity with proper identification and a bank account, you know and can prove that you can repay the payday loans on your next paycheck, and you are willing to pay the fees involved. Congratulations! You should cruise right on through the qualification procedures at the cash advance loan center.
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