Even a thriving Funeral Home can get experience a cash crunch. It could be an emergency hearse repair, a life insurance assignment that’s delayed, a check that bounced, a bill that absolutely must be paid.  That’s when it’s easy to stumble into the not-so-hidden world of payday loans.

Payday loans are loans that are given out for relatively small amounts of money (usually less than $1,000) for short periods of time. The idea behind a payday loan (also know as a “cash advance” or a “check loan”) is that it gives you some cash to tide you over until the next payday.

Payday loans usually require access to your checking account to deposit the loan and later to access the repayment funds.

Despite the speed of getting funds in an emergency, payday loans are not a good financial decision for many reasons.

Review the Costs for your Funeral Home

First, the annual percentage rate (APR) on payday loans can be as high as 2100% (yes, you read that number correctly). For reference, the highest APR allowed for credit cards is 29.99%. When borrowing money, you should always borrow from the source with the lowest APR possible; this will decrease the amount you pay in interest.

Figuring out the amount of interest you are paying isn’t always so clear. For one thing, an APR is calculated on a yearly basis. A typical payday loan lasts one to four weeks, and the cost is not given to you in annual terms. In fact, payday lenders may refer to the cost of borrowing money as a “fee” rather than as interest, which makes it seem like it is something you have no control over.

How They Work

Here’s how a payday loan works: You pay a “fee” for borrowing money at a set rate. This fee is usually between $15 and $30 for every $100 loaned. This sounds reasonable – just 15% to 30% – but because it is for a short period of time it is actually much higher than a credit card charge for the same amount. If payday comes around and you can’t afford to pay off the original loan plus the fee, you can “roll over” the loan … for another fee. This can snowball expenses for the consumer. The goal of a payday loan enterprise is to keep making money – lots of it.

Consider Alternatives to Payday Loans

While the prospect of quick cash for a fee may be appealing, it is almost never worth the risk of being caught in the payday loan trap. Although some websites advertise payday loans as a way to build your credit, it is an expensive and risky route to take. Before taking out a payday loan, ask yourself: “If I can’t afford my expenses with my current paycheck, is there any reason I will be able to pay back a loan plus fees – and cover my normal expenses – when I get my next paycheck?”

If the answer is no, consider some alternatives to a payday loan:

• Credit card interest rates are lower than you’d pay for a payday loan. If you have access to credit or credit card cash advances, choose those resources over payday loans. See if you can open a new credit card or increase your limits on current cards.
• Accept Life Insurance Assignment and working with a trust assignment funding company like Trinity Funeral Funding
• See if you can get a small loan from a bank or credit union. Small and short-term loans have become more common as banks and credit unions provide alternatives to payday loans for their customers.
• To avoid getting in a pinch in emergencies, build an emergency fund so you won’t have to take out loans for unexpected expenses.

The Bottom Line

Payday loan borrowing can be an expensive cycle that is difficult to break. The industry is designed to take advantage of people with limited options, and the consequences of taking out a payday loan can be many times more costly than the initial expense. If you are in debt and struggling to make ends meet, consider getting financial counseling to find a way out of your tight circumstances.

Consider Life Insurance Assignments – The Easy Way

Assignment factoring is a simple process by which a 3d party funds the cost of your funeral services through an assignment of proceeds from an insurance policy.  Here’s how it works.  A 3d party funeral funding company such as Trinity Funeral Funding will provide all of the paperwork needed.  Generally a 1 page assignment is completed by the beneficiary and the funeral Director, a claim form provided by either the insurance company or Trinity and a death certificate.  There are times where a funeral bill or a beneficiary information form are needed as well.  Your funding company will let you know what is needed for each claim.  Once these documents are completed and the policy is verified (normally within a day or two), funds are wired to your funeral home.  The payments from the insurance company are then sent to Trinity and any additional proceeds are sent directly to the beneficiary.  For more information visit http://www.trinityfuneralfunding.com/ or call Scott at 201-750-1117.