Before You Get A Payday Loan, Read This Article

Are you in a financial bind and in need of extra money? Is a payday loan for you? If you require a quick cash infusion and you have poor credit, you may be a good candidate for a payday loan. It’s a good idea to gather as much information about them as possible before you decide to take one, though, and this article can help you do that.

Try to not chose a lender that has fees that go above 20 percent of what you have borrowed. While you can expect to pay more than you would for other types of loans, anything more than that is very excessive and you should get your loan from elsewhere.

Do your research on a loan company before getting a loan. You need to be careful because some charge unnecessary fees that are well hidden. The company you choose should be well-established with at least 5 years of experience. This can help you avoid scams.

Ask a good deal of questions before you receive a payday loan. Read the fine print and make sure you know how the payday loan company will keep your confidential information private. Be sure to get all the information you’ll need, so that you’re not surprised later on.

Before you take out a loan, make sure you are getting a safe loan from a reputable business. Lots of individuals believe that the most reputable and safe payday loans also offer the best conditions and terms.

If you have an outstanding payday debt, make sure your checking account balance is adequate to cover the loan when it is due. It’s not uncommon for a lender to set the loan up to be paid back via drafts from your account. It is important to consider the amount of time it takes a deposit to reach your checking account and deposit it early if you need to.

Learn from payday debt. Once you receive and repay such a loan, you might feel a sense of resentment over how expensive it actually was. Turn that feeling into new commitment to save a portion of every paycheck in order to prevent the need for future payday loans.

Be sure that all lending terms of your payday loan are documented in writing when you fill out the application. The way the clerk conveys the details in speech may be quite different from how they sound on paper. Reading the entire contract to find out what the terms are and what you have to consider.

To help cut the cost of a payday loan, do not refinance it. Lots of people put themselves in debt through constant refinancing. Payday loans have high interests rates so even a small loan can have you paying a lot of money. If you are unable to payoff your loan by its due date, you may want to apply for a personal loan instead of refinancing your payday loan.

If you need money fast and don’t have another way of obtaining it, payday loans may be a lifesaver. Try your best to understand all of the terms of the loan before signing anything. The interest and fees are usually pretty high so it makes it difficult to pay them back.

Many times, you will have to have a checking account to take out a loan. This is due to the fact that a lot of these companies tend to use direct payments from the borrower’s checking account when your loan is due. The repayment for you payday loan will be automatically debited from your checking account on the agreed upon date.

A lot of payday lenders require a bank check account. The reason for this is that most payday lenders have you fill out an automatic withdrawal authorization, which will be used on the loan’s due date. The loan will be automatically deducted from your account on the day the loan comes due.

You should have documents that prove your age and employment when take out a payday loan. You will need to provide proof that you are of legal age to take out a loan, and that you have a regular source of income.

Before you give a loan agency all of your information, you need to make sure that they are reputable. Read consumer reviews and contact the Better Business Bureau to learn about complaints. Also, make sure that the site you use has a privacy policy that that is easy to find.

Loan Originator Compensation

The Consumer Financial Protection Bureau released its final rules regarding Loan Originator Compensation Requirements under the Truth in Lending Act (Regulation Z), on January 20, 2013. The final rule implements requirements and restrictions imposed by the Dodd-Frank Act concerning loan originator compensation; qualifications of, and registration or licensing of loan originators; compliance procedures for depository institutions; mandatory arbitration; and the financing of single-premium credit insurance. I am going to focus on how the new amendments will affect mortgage brokers and correspondent lenders.

There are only a few real changes, but you can tell our policy makers valued the input of our industry this time. The most dramatic change is the ability for mortgage brokers to do borrower paid loans AND be able to compensate their loan officers. The ban on dual compensation is still in effect for brokers, making them less competitive against their correspondent peers. It was an uninformed decision by our policy makers to let this happen to begin with, and they have corrected it. Only problem, it doesn’t go into effect until January of 2013.

Clarification on retirement plans has been included. It was unclear whether the contribution to employee retirement plans was allowed or not. It is clear now. Yes, mortgage loan originators can now have a retirement program without the worry of violating federal law. Employers are now able to contribute to a designated tax-advantaged plan for their employees, as defined by the IRS.

Also included with a few stipulations, is a profit based non-deferred compensation allowance. It basically allows a bonus up to 10% of a loan officer’s total compensation.

Here is a breakdown of all the changes:

Note: Originator is defined as a loan officer ( a person who takes applications and negotiates terms) and a mortgage broker ( an entity that does not fund loans from its own funds or warehouse line), not a depository bank employee or a correspondent lender.

Record Retention

Correspondent: Requires the retention of records regarding all compensation paid to your loan officers, the loan officer compensation agreements, for a period of three years from the date of the transaction.

Broker: Requires the retention of records regarding all compensation paid to your loan officers, the loan officer compensation agreements, compensation received from your Investors, your agreements with them, compensation received from a consumer or other person (borrower paid transactions), for a period of three years from the date of the transaction.

Payments based on terms of a transaction.(Broker/Correspondent)

You cannot compensate your loan officers based on any term (rate, profit, YSP, etc.) on a single transaction, multiple transactions, or a “pool” of transactions. You cannot pay them based on a “proxy” for a term either. A factor, although not an obvious loan term, is considered a “proxy” for a term of the transaction if the factor consistently varies with that term over a significant number of transactions, and the loan originator has the ability, directly or indirectly, to add, drop, or change the factor in originating the transaction. It is allowable to pay your loan officers a “fixed percentage of the loan amount”, and if needed, setting a minimum and maximum commission amount.

You are allowed to make contributions to a “designated tax-advantaged plan” as compensation. A designated tax-advantaged plan means any plan that meets the requirements of Internal Revenue Code section 401(a), 26 U.S.C. 401(a); employee annuity plan described in Internal Revenue Code section 403(a), 26 U.S.C. 403(a); simple retirement account, as defined in Internal Revenue Code section 408(p), 26 U.S.C. 408(p); simplified employee pension described in Internal Revenue Code section 408(k), 26 U.S.C. 408(k); annuity contract described in Internal Revenue Code section 403(b), 26 U.S.C. 403(b); or eligible deferred compensation plan, as defined in Internal Revenue Code section 457(b), 26 U.S.C. 457(b). The contribution cannot be directly or indirectly based on the terms of that individual loan originator’s transactions.

A bonus can be paid under a non-deferred profits-based compensation plan based on the profits earned by the loan officer if the non-deferred compensation is not based on a loan term or condition and at least one of the following conditions is satisfied:

The compensation paid to an individual loan originator does not, exceed 10 percent of the individual loan originator’s total compensation corresponding to the time period for which the compensation under the non-deferred profits-based compensation plan is paid; or

The individual loan originator was a loan originator for ten or fewer transactions during the 12-month period preceding the date of the compensation determination.

Dual Compensation (Brokers)

Dual Compensation (receiving funds from the borrower and creditor) is still not allowed for mortgage brokers.Originators who are employed by a Mortgage Broker have been unable to receive compensation when the borrower paid origination fees and discount points (Borrower Paid). Beginning January 20th, 2014, a mortgage broker will be able to compensate their loan officers on these transactions, as long as the compensation is not based on terms or conditions of the loan.

Safe Harbor (Brokers)

When meeting the Safe Harbor requirement, some verbiage has changed as far as the options you must present to the customer:

The option that stated “The loan with the lowest total dollar amount for origination points or fees and discount points.” Has been changed to:

“The loan with the lowest total dollar amount of discount points, origination points or origination fees (or, if two or more loans have the same total dollar amount of discount points, origination points or origination fees, the loan with the lowest interest rate that has the lowest total dollar amount of discount points, origination points or origination fees).”

Loan officer requirements and hiring standards.(Correspondent/Broker)

All of the new requirements are already covered by the SAFE Act and applied when a loan officer registers for NMLS and State licensing.

Name and NMLSR ID on loan documents.(Correspondent/Broker)

This requires the originators name and NMLS number on the credit application, the note or loan contract, and the security instrument.

Effective June 1, 2013

Mandatory Arbitration.(Broker/Correspondent)

Eliminates the use of mandatory arbitration clauses, waivers of Federal statutory causes of action, and waivers of consumer rights. Arbitration can be used, but not required in a contract.