Many a times in life we come across a situation that needs us to make some urgent arrangements for cash. It might be the medical bill that needs to be paid urgently or a great offer that you simply cannot afford to miss out on. In such a situation, payday loans are an easy and great way to get some instant cash.
What Are Payday Loans?
Payday loans are small amounts of cash that range from anywhere from $100 to $1000. This loan amount has to be paid back on the next payday. They are also called as cash advance loans. Now payday loans are becoming very popular across the country as they do not have many of the hassles that are common with other forms of loans. The main reason for the popularity of payday loans is the convenience of the whole process.
Requirements
There are hardly any tedious processes and requirements for you to get the payday loans. All that you need is a checking account with a bank in America and proof of employment. You will then be eligible to get the payday loan approved. Now there are many online payday loan companies that instantly approve the payday loans and you can even get the cash credited into your account on the same day. A few simple questions is all that is asked by the companies. They might also require you to fax certain documents in some cases, but still the entire process does not take more than a day to complete. No other loan process is as fast as payday loans.
Repayment
Usually most payday loan companies require you to give them a post dated check which will be deposited on your next payday. Some payday loan companies can also arrange for the money to be directly taken out of your account on the next payday. So you won't even come to know that you have paid it off. So you have up to 30 days to repay the amount. If you cannot pay the money on this payday, then you can get up to a couple of extensions as well. However, this service involves a separate charge.
Downside
The high interest rates or the APR is one major drawback of payday loans. The entire term of payday loans is synonymous with emergency cash. You should only opt for payday loans if you need some fast cash urgently and you have no other resource to turn to. This is because you will be charged approximately $25 on every $100 that you borrow. So if you borrow $1000, you owe the company $1250 on the next payday. You may not even receive the full $1000 in the first case. The lender deducts financial charges before giving you the money.
If you roll over your loan to the next payday, the charges mount further and can actually get out of control. So it is extremely important that you know all the pros and cons of payday loans before you sign up for a service of this sort. Seeking counseling from a financial consultant will give you a better idea about these loans. What you are looking at is a short term solution for some urgent requirement of cash. You definitely do not want it to become a long term never ending problem for you. So, the bottom line is that you should only opt for payday loans as a last refuge. Pay it off on your first payday itself and you shouldn't have any trouble with the service.
In fact, it is a short term cash advance to tide over expenses cropping up all of a sudden, like a big repair bill for the car, a medical bill, emergent travel expenses, meeting day to day expenses or any other expenditure that may require to be met at short notice. It is not intended to cover financial problems that may be of a long-term nature, which may be resolved by consumer credit counseling.
The services of a payday loan company are usually sought when there is a sudden urgent need for cash, which may not be available from any other source. There are about 10,000 payday loan outlets operating in the United States.
The Internet is a good source for finding an outlet or store near a borrower's place. Care is taken by these companies to locate their outlets at accessible locations, and to keep their working hours flexible and different from banking hours. Telephone calls to the payday loan store, a visit to their outlet or an online application are the some of the ways to apply for a payday loan.
Usually a payday loan is limited to a small amount; anywhere from $50 to $500. On approval, the loan amount is deposited directly into the bank account of the borrower within 24 hours of the submission of the loan application. The borrower can rest assured that confidentiality with respect to the transaction is maintained.
The lending terms for these loans are structured to be hassle free. Credit rating has no bearing on the approval of the loan application and in many cases no credit check is done. So, a borrower with bad credit may also qualify for the loan. The borrower just needs to be at least eighteen years in age, and should have a full time job with an income of above a thousand dollars per month. He or she should be a US citizen with a checking account. Post-dated checks are generally given to the lender against the loan.
An advantage of a payday loan is that they are renewable and extendable. The loan is repayable on the next payday of the borrower. There are multiple options for paying back the loan. The lender is allowed to cash the checks given as security, or repay the loan amount personally at the office of the lender. However, if either of the options is unfeasible, the borrower can approach the lender for an extension of the payback date. Usually, however, such an extension is permitted only twice.
The interest rates for these loans are exceptionally high. To give an example: if a loan for $100 is taken for 14 days, which is the next date for one's paycheck, then the amount to be paid back would be $115. The annual percentage rate of which, on calculation, turns out to be a whopping 391 percent. In case of extension of the payback date, the rates would go higher.
So, the desirability of a payday loan would depend on the urgency of the borrower's need and his capability to bear the interest burden. While payday loans are a fast and sure way to solving unforeseen urgent credit needs, on the other hand, they carry an exceptionally high interest burden.
Both Daniel Wesley & Joe Kenny are contributors for EditorialToday. The above articles have been edited for relevancy and timeliness. All write-ups, reviews, tips and guides published by EditorialToday.com and its partners or affiliates are for informational purposes only. They should not be used for any legal or any other type of advice. We do not endorse any author, contributor, writer or article posted by our team.
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