Emergency Loan: Which One is Right For Me?

Unexpected expenses crop up all the time. Your child needs to go to the emergency room. Your dog needs surgery. Or you realize that you can no longer avoid your leaky roof. Whatever the reason, this type of emergency expense needs to be paid for. If you don’t have the money in savings, getting an emergency loan might be just the thing to tide you over.

Emergency loans, also known as payday loans or short-term loans, can help during times of crisis. And while they do have fees and interest rates associated with them, they may be your best bet for covering unexpected expenses when they occur. What types of emergency loans are out there? Which one is right for you?

Short-Term Loans

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The Wall Street Journal reported that payday lenders are courting bank customers. The reason? Many bank customers who feel undervalued at banks find a measure of respect at payday lending offices, according to the WSJ.

For the borrower, the process for obtaining a payday loan is far less arduous than applying for a line of credit. The borrower is instructed by the payday lender to write a check dated two weeks ahead for the amount he or she wants to borrow. Once the line of credit is due, the lender cashes the check. If you know you’ll have money after payday to cover the line of credit, this can be an easy way to get cash fast.

Borrowers should do their homework about the interest rates and the availability of payday loans. The Consumer Federation of America (CFA) maintains a list of which states allow payday lending and which prohibit or have restrictions on payday loans. The state-specific information from the CFA covers maximum loan amount, maximum line of credit term, finance charges, APR, and collection information.

Payday loans can be obtained in amounts from $100 to $1000. Borrowers should check state requirements for loan amounts.

Lines of Credit

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New to the finance world are banks that offer lines of credit similar to payday loans. These lines of credit are considered to be “short-term advances of relatively small amounts,” according to The New York Times  Your Money. Advances are generally up to $500 with a fee charged by the bank of approximately $10 per $100 borrowed, according to the The New York Times.

The bank deducts the amount of the line of credit plus associated fees from the borrower’s next scheduled direct deposit. What are these funds to be used for? The New York Times states that they are a “short-term solution to an emergency cash crunch,” not a “long-term way of managing your money.” Keep in mind: This isn’t a line of credit for a new pair of shoes. Because of the cost to borrow the money it should be reserved for emergencies, like medical expenses, replacing broken appliances, or other unexpected events.

New Installment Loans

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A new kind of loan has emerged: installment loans. These loans, which are paid back in regular installments over a period of time — from four to 15 months — can provide a convenient way to pay emergency bills, even if you have bad credit. Rates for installment loans may be lower than what they are for payday loans, and if you pay off your first loan on time, you may be eligible for lower rates for subsequent loans.

Installment loans are best suited for people who may not qualify for a credit card. The average credit score for some of these borrowers is 500.

Beware of Loan Scams

No matter what loan you go with for your emergency situation, be aware of how they work. There are reports of scams where alleged bill collectors call to threaten you to repay the loan over the phone.

If you get a call you’re unsure about, don’t give out any account information, your social security number, or credit card information. Ask that the caller send you information in writing on the debt. You also can call your original lender to make sure the call is legitimate. If not, report the caller to the Better Business Bureau.

Peace of Mind

Emergencies can be stressful, and adding the financial burden of trying to pay for it only makes the situation worse. Having options like these to take out a loan to help pay for your emergency can at least take part of the money out of the equation. Just be sure to pay the loan off as soon as possible to avoid extra fees and higher interest rates.

5 Food Brands that Couldn’t Manage Debt

Ever wonder what happened to your favorite food brand from childhood? While some companies manage their business just fine, others succumb to the pressures of debt and end up folding, leaving consumers without that desired treat . . . at least for a time. In most cases, companies do restructure while under the protection of Chapter 11 and continue to operate, making a comeback. However, as you will shortly see, returning from bankruptcy is no guarantee that things will work out the second time around. Here are a few of the companies that have recently gone out of business or will be bankrupt shortly.

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1. Hostess®

The popular Twinkie manufacturer is in trouble . . . again. In 2004, Hostess filed for bankruptcy but managed a comeback in 2009. Unfortunately, the comeback wasn’t to last, and the sweets company is in the weeds again.

Where did Hostess go wrong? The company is deeply in debt, owing the Bakery and Confection Union Fund the most, more than $994 million. Dozens of other creditors are also waiting for payment. It’s looking like they won’t receive it, however, with Hostess™ filing for Chapter 11 for the second time in a decade. Twinkie sales were down by 2 percent in 2011, a drop the company attributes to more people opting for healthier foods.

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2. Mrs. Fields®

Everyone knows and loves Mrs. Fields the cookie company, but in August 2008, that popularity didn’t help when the company filed for bankruptcy with $196 million in debt. By October, the popular cookie maker was back on the market. While the main company was undergoing all these financial changes, franchisees continued as normal.

In 2011, Mrs. Fields faced a second bankruptcy and focused on restructuring the company to avoid this possibility. With the support of major shareholders, the company hopes to make out-of-court changes to the financial situation and ensure that there is no future Chapter 11.

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3. Dippin’ Dots®

In 2011, Dippin’ Dots filed for Chapter 11 bankruptcy protection, following a long, drawn-out battle with the company’s principal lender. Dippin’ Dots produces small dots of ice cream, specially frozen with liquid nitrogen to create tiny balls. The company is a franchise and has over 140 locations throughout the nation.

The problems started when the economy plummeted and no one wanted to buy the ice cream dots, which cost a few dollars per cup. With sales dropping, debt rose, and Dippin’ Dots ended up owing $12 million. The majority of the debt was to Regions Financial Corp., which pressed for foreclosure, prompting the ice cream manufacturer’s bankruptcy.

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4. Friendly’s® Ice Cream

Ice cream companies seem to be faring poorly in today’s economy, perhaps because of the nonessential nature of the sweet stuff. Friendly’s was another company that filed for Chapter 11 in 2011, and while it had almost 500 restaurants, more than 60 of those were closed due to debt-related issues, in an attempt to restructure the company and make it more viable. Friendly’s managed to get a hold of $70 million in debtor-in-possession financing, which was hoped to help the company make a comeback.

There is promise for the future, however. The company is managing its remaining locations and will be cutting staff to keep costs lower this time around.

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5. Forward Foods, LLC

In 2009, the maker of Detour® energy bars ended up filing for Chapter 11 protection with $25.4 million of debt. The main reason the company found itself in such dire straits was the fact that the majority of the energy bars produced included peanuts from the Peanut Corp. of America, which allegedly had tainted product. Forward Foods was forced to recall potentially contaminated energy bars, destroying around 75 percent of sales. The end result? A company unable to handle the large amount of debt in the face of such a setback.

The Peanut Corp. of America recalled all peanut products that originated from its Texas base after a salmonella outbreak was reportedly linked to the products. Hundreds of food companies received the supposedly tainted peanuts and had to recall their own products, including all peanut-based Detour bars.

All five of these food companies have had problems with debt, and while they may make a comeback after filing for Chapter 11, Hostess proves that this isn’t a guarantee of success. Like many companies that end up bankrupt, unless these organizations change their ways, they will simply end up in the same position again. A second bankruptcy is really not what any company wants to deal with, as it could end up being the death of them.

*The company, product and service names used in this article are for identification purposes only. All trademarks and registered trademarks are the property of their respective owners.

A Broad Perspective to Personal Emergencies: How Bad Is Your Life?

“It could always be worse.” You’ve heard it a million times, but when you’re in a bind, you don’t really think about how it could be an even more unfortunate situation. Cliché advice isn’t easy to take to heart, mainly because it’s just that — cliché. I’ve been there. When you’re having a rough day, it’s not easy to forget about your problems and think of other people’s problems.

However, if you did take a moment to truly visualize what others go through, it’ll give you the perspective you need to relax. No one ever tells you that part. It’s frustrating when someone says, “Oh, get over it,” but what they’re trying to say is, “Trust me, time will pass, and this will be nothing.” To help get to that feeling faster, here are some tips for you.

1.) Zoom out.

The hardest part about any troubling situation is feeling trapped inside of it. Worry has its way of pushing to the center of consciousness. Even when everything is going completely well, our main focus is on our own lives — our own situations and our own problems. We often don’t think in depth about the lives of other people around us, let alone the lives of people in other states and in countries across the world.

The first step in rectifying the situation is to resolve it. Whenever you feel like you’re fixated on a recent issue, zoom out. There are multiple layers of this process, so sit down for a bit and think. First, zoom out and imagine the entire timeline of your life. Don’t dwell on this specific hour or this specific day. Your life is a sum of its parts, and in the grand scheme of things, this one problem probably won’t mean a whole lot a few years, a few months, or even a few hours from now.

Next, zoom out geographically. Maybe you’re in a suburb of one city of one state of one country of one continent. There are billions of other people, most of whom have probably faced similar situations, and many of whom are suffering from much worse circumstances. Think about it: if you lost your job, consider the people who’ve never had jobs — the people solely concerned with having enough to eat to survive another day.

2.) Do what makes you happy.

Try not to succumb to stress and panic. Once you’ve “zoomed out,” another way to gain perspective is to think about the positive things in your life. One way to accomplish this is by doing the things you normally love to do. Do you like going for a run in the evenings? Reading stories to your kids? Going out to eat at fancy restaurants?

Whether it’s a simple, everyday task you enjoy or a more every-so-often type of occasion, treat yourself for the day. Do everything in your power to help improve your mood. Relaxing for a bit can really change your perspective on things in a natural way.

Another way to turn things around is to think about all of the positive aspects of your life. If it helps, make a list of every person you love and why. Then make another list of everything you feel grateful for. Go ahead and include the little things, too. If you don’t feel like taking this semi-cliché (but effective) route, try breaking out a photo album or some other cheerful reminder of good times in your past.

3.) Address the situation; let the rest go.

When you’re in a bind, don’t try to avoid stress by avoiding the situation as a whole. That will simply lead to more stress and frustration in the future. In order to feel better about your problem, you have to come to grips with the fact that it’s solvable and probably not as big of a deal as you’re making it out to be.

When you’re in the right mindset, tackle the problem and actively think of solutions. For example, if you got into a car accident (and everyone is safe), check with your insurance company to see how your insurance payments might change and also try to find a new method of transportation until the car is fixed. While it may seem like a pain to do these things, they’re minor compared to another reality, which is getting seriously hurt.

Just deal with what needs to be dealt with. Make a plan, sort it out, and remind yourself that everything will be fine. If you’re having trouble, and you’ve already done steps 1 and 2, talk to loved ones. Sometimes just having a good conversation with someone important to you can really make you see the big picture.

Conclusion

It doesn’t matter who you are — life is going to throw some challenges at you. There will be times when you have to struggle, but how you approach these struggles is what defines you. Instead of complaining or panicking, channel this emotion toward problem-solving, and just know that you’ll make it through.