The best way to define payday loans is a high-interest, short-term loan. They are frequently given to those who have an urgent need for cash and don’t have the time to wait for a traditional bank loan to be approved. Borrowers occasionally use payday loans to cover unforeseen expenses like rent or auto loans. Others use them to advance financially in case they experience an unforeseen loss of income or employment.
Payday loans have become increasingly popular in recent years. Have you tried, or are you planning on getting a payday loan?
If yes, this article presents the basic facts you need to understand about this type of financing.
What are payday loans?
Payday loan are short terms loan that are payable within one month.
A payday loan may be a viable option for people who require immediate cash.
That is why payday loans are also known as cash advance loans.
Others see it as a quick loan because the process is simple and fast.
One reason why it is much easier to get a payday loan is that there is no credit check is required.
Lenders do not conduct a credit check to determine whether the applicant deserves approval.
A payday loan can be obtained by anyone, regardless of credit history or credit score.
Does this mean no other prerequisite is required?
The specific prerequisites may vary from one lender to another.
Typically, most lenders only require that the borrower is of
- legal age or at least 18 years old
- be a legal resident of the United States
- must have an active checking account
- and must have stable employment
Some lenders will require the borrower to write a post-dated check to ensure the loan is paid back on time.
Indeed, payday loans give borrowers the chance to get the cash advance they need as they wait for their next paycheck.
However, payday loans are not recommended for all kinds of financial needs and are not advisable for paying other debts.
Borrowers are also discouraged from taking out multiple payday loans from different lenders at once.
Take note that the amount you incur on interest rates alone is enough to put you in serious debt.
What are the benefits of payday loans?
One of the primary advantages of payday loans is their ease of obtaining. You can usually get one within minutes by filling out an online application.
A payday loan is much faster and easier than getting a loan from a bank or credit union.
Payday loans also have the advantage of having a short repayment period. It can help you save money on interest payments because you won’t have to repay the loan over a lengthy period of time.
What are the risks of payday loans?
Despite their ease of application, bad credit payday loans have high-interest rates that range from 100% to 300%.
In States where payday lending is not regulated, some lenders may impose excessive rates and penalty fees on borrowers who fail to submit their payments on time. As a result, acquiring one payday loan can quickly lead to uncontrolled debt.
In some states, payday lending is considered illegal.
However, customers can still obtain cash advance loans from lenders doing business in states that permit online payday lending.
As a result, the cash advance is given via electronic money transfer when the loan application is approved.
The loan amount is limited to $1,000 or less in most states where payday lending is permitted.
When applying for a payday loan, it is essential to check the lending company’s background and reputation.
Take the time to read the fine print and ensure that the lender complies with the State law.
Lastly, borrowers who take out payday loan need to be sure they can make their payments on time to prevent accruing interest and penalty fees.
Payday loans can be helpful in a financial emergency, but they should be used only as a last choice. Consider all of your options and compare interest rates before taking out a payday loan. If you decide to take out a payday loan, carefully consider the terms, circumstances, and your ability to repay it on time.
