So far we have written about what happens when you get auto loans from shady characters around the neighborhood and when lending comes between family members. This week we will discuss some of the pitfalls of getting short term loans against your next paycheck to replace a broken down vehicle when your options are limited. There are two ways you can get a loan against your next paycheck; the first one and most common is a payday loan where you get a loan from a company to tide you over to your next paycheck. The second and less common is to ask for an advance directly from your employer.
Payday loans are common in all states either over the internet or by visiting a store. Here is how it works: You apply for a loan to get the money from your paycheck before you get paid and you get paid early in a sense. The thing is it won’t be as much as if you would have you waited for your paycheck. The difference between the amount of your paycheck total and the amount you get is called a transaction fee and if you think of it as an interest rate it is a really high rate. When payday comes the lender takes all of your paycheck from your bank account or prepaid cash card. This means that you have now made your emergency purchase such as a car that will at least get you from place to place. It will be harder to pay for regular expenses such as food and housing because you will have less money to work with until the next paycheck. What happens next is even worse because you may find you cannot make it to your next check because you made a major purchase. This can cause you stress and you may need another loan which will take a bite out of your next paycheck plus and an additional amount of money because you could not pay back the loan when you were paid if the money was not available.
The second type of loan we will touch on is an employer advance which is a loan direct from your job. There may not be any interest and if there is will be low in most states. The challenge with this loan is they are not truly private. You will be telling the boss about your money issues and then your personnel department at your job will enter the loan into your file. Payments are directly taken from your paycheck before it reaches your bank account and may be deducted from every paycheck. This takes away the flexibility an auto loan will give you to make payments monthly.
This is another reason auto loans from lenders dedicated to lending to people who are looking to buy a car is the safest, cheapest, and most confidential way to purchase a vehicle. BlueSky AutoFinance is here to serve you so fill out our application today and you can make that car purchase while having room for other expenses and get some piece of mind. We hope you have learned from our series on the most dangerous auto loans and have helped save money on your next auto loan.