A payday loan is a short-term loan, generally for 14-30
days, that is paid back by writing a post-dated check, or agreeing to an
electronic withdrawal, to be deducted from the borrower’s bank account
on their next payday. Borrowers may be eligible for loans of anywhere from
$100 to $1,000, depending on the lender’s policies and the borrower’s
income. Just like every other type of loan, there are advantages and
disadvantages to this type of
borrowing.
On the plus side, payday loans are easy to apply for, and easy to get.
Borrowers are asked to fill out a short application form that includes
where they work, their home address and telephone number and monthly
income. Applicants also provide information about their bank account,
including the name of their bank and their account number. In general, the
application is much simpler than those required by traditional banks, and
less verification is required.
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Borrowers are asked to provide a recent pay stub,
their latest bank statement, and a copy of their driver’s
license. There is no credit check involved, which shortens the
time frame considerably. The entire process takes just a few
minutes, instead of days or weeks, and can be approved on the
spot,
resulting in the borrower receiving a cash loan in approximately
half an hour. Once approved, the borrower writes a post-dated
check for the date of their next payday, and for the amount
borrowed, plus the lender’s fees. |
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Getting a payday loan from an Internet lender is even quicker and simpler.
Borrowers provide their bank account number and the loan money is direct
deposited into the borrower’s account, oftentimes within a matter of
hours. Repayment is made the same way, by direct withdrawal from the
borrower’s bank account, for the amount and on the date specified in the
loan agreement. Repayment arrangements vary and some companies give the
borrower an option to roll the loan over by paying an additional loan fee.
The borrower, therefore, has the option of paying off the entire loan on
the original date agreed, or of paying additional fees to extend all or
part of the actual loan to a later date.
The other major advantages to getting a payday loan are that there is no
collateral required and no credit checks involved.
Payday loans are available to people who are working, whether or not they
have good credit or are current with all their monthly obligations. A
person can qualify for a payday loan even without owning a home or a car,
or any other form of real property.
Payday loans can be especially valuable in an emergency situation. Maybe
your car breaks down or you have an urgent
medical need and the unexpected costs were not anticipated in your monthly
budget. Nearly everyone finds themselves in an occasional situation where
they absolutely need some extra cash and don’t have savings or other
resources to tide them over. In those cases, a payday loan can be a
lifesaver.
Plus, payday loans are easy to find. There are literally hundreds of
websites dedicated to either making payday loans or
to helping the consumer locate the best lenders. The borrower can find the
particular loan that best fits their needs, without
ever leaving the comfort of their own home.
Is there a downside? Of course, as with any type of borrowing and lending,
there are disadvantages to payday loans. For
example, they cost more than traditional loans because lenders are allowed
to charge higher loan fees or finance charges, for short-term, unsecured
loans. Most payday loan companies offer flat fees that are based on the
amount borrowed and the amount of time until it is paid back in full.
For example, some lenders charge a flat fee of $15 per $100 borrowed,
which doesn’t seem like much at first glance. However, a $15 fee per
$100, when examined on an annualized basis, amounts to an annual
percentage rate (APR) of 391%. In fact, the average APR for payday loans
has been estimated at 450%.
In addition, more fees come into play if the borrower needs to roll the
loan over. If, for instance, the loan were rolled over
three times it would cost an extra $15 each time, in addition to the
original $15. In that case, the original $100 loan could
cost the borrower as much as $60.
If you are contemplating a payday loan, it is important to shop around,
make sure you understand all of the fees involved, and make sure you
borrow only enough that you can pay it off in full by your next payday.
About the author:
Max Hunter is the author of many credit related articles. If you are
looking for help with Payday loan or any type of faxless
loans please visit us at http://www.PaydayLoanChoice.com
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