What is a Payday Loan? Tips
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When You Need to Borrow Money Fast
Unexpected expenses such as car trouble, housing repairs and medical emergencies can cause monetary problems for almost anyone. This results in an individual needing to borrow money fast to cover regular monthly expenses, as well as the unexpected expenses. When these problems occur some individuals may turn to friends or family members for a loan, while others may make arrangements with creditors to defer payment for a month. However, payday loans are also an option for these individuals.
Payday loans are small, unsecured loans which typically must be repaid on the borrower's next payday. There are usually fees associated with this type of loan and failure to repay the loan on time results in the addition of interest on the unpaid portion of the loan.
How Does a Short Term Loan Compare to Other Loans?
Those who are in need of money fast will usually wonder about a short term loan. Is it right for them? Those who seek out this type of loan typically only need to borrow a small amount of money and are often able to repay the loan rather quickly. These short term loans are generally referred to as payday loans because the borrower is required to repay the loan on his next payday. A payday loan usually has a repayment period of 10 to 15 days, but a short term loan may refer to any loan which has a relatively short repayment period. These loans are in direct contrast to other types of loans such as vehicle loans, which may have a repayment period of approximately two to five years and mortgage loans, which may have a repayment period ranging between 15 and 30 years.
How Payday Lenders Operate
Payday lenders provide small loans which typically must be repaid within two weeks. There is usually a maximum amount the applicant can borrow with this type of loan too. Before being approved for a payday loan, the applicant must submit a brief application. This application provides information which is used to verify the applicant's identity, employment status and banking information. Upon receiving this information, the payday lenders typically review and verify the information and either approve or reject the application.
The approval process for a payday loan is usually rather quick. Most payday lenders can approve applications on the following business day. If the loan is approved, the funds will be deposited in the borrower's bank account the same day the loan is approved. Applications submitted after a certain time may be processed the next business day and funds will be deposited into the borrower's account the second business day after the application is submitted.
Once the loan is approved and funds distributed, the borrower typically has 10 to 15 days to repay the loan. The loan is usually repaid on the borrower's next payday. However, if the next payday is within seven days of the loan approval, the lender sometimes allows the borrower to repay the loan on the subsequent payday. Failure to repay the full loan amount, plus applicable fees, by the end of the repayment period will result in the borrower being assessed interest on the loan.
When a Small Loan is All You Need
Payday loans are one option for those who are in need of a small loan for a short period of time. The need for this type of loan typically arises when an individual has unexpected expenses which result in difficulty paying the bills during a particular month. For instance, what if your car needs repairs, but you don't have the extra money to pay for them right now? A payday loan can help you get your vehicle fixed quickly. In this instance, you may only need a small loan and can repay the loan the next time you get paid. This scenario is very typical for payday loan applicants. The payday loan provides the borrower with a relatively small amount of money which must be repaid quickly.
Fees Associated with Short Term Loans
The fees associated with short term loans typically include an application and processing fee, as well as interest if the loan is not repaid in time. Additionally, some lenders may even charge a fee to establish an account for new borrowers. The fees associated with short term loans, such as payday loans, can translate to a considerable annual percentage rate. A typically payday lender charges between $15 and $30 for every $100 borrowed. This may not seem like a large amount of money, but it is quite high percentage-wise. However, for borrowers who are in need of cash quickly, these fees may be worthwhile.
Payday loans usually must be repaid within 10 to 15 days and failure to repay the loan in full during this time period will result in the borrower being charged interest on the loan. The interest rates associated with these loans may vary and borrowers should verify the applicable interest rate, as well as any required fees before entering the loan agreement.
The Benefits of Payday Lending
For many, the fees associated with payday lending is often one of the downsides to this type of loan. However, there are many benefits to a payday loan, as well. Some of the benefits of payday lending include a quick approval process and the ability to secure a loan even with poor credit. Payday loans are unsecured loans for relatively small amounts of money.
The approval process for payday loans is usually rather quick. This is because these loans are approved based on the applicant's net monthly income. With this information, the lender can quickly determine whether or not the applicant will be able to repay the loan on the next payday. Additionally, the lender is able to offer the applicant an unsecured loan even if the applicant has poor credit. The lender is able to do this because, in most cases, authorization to withdraw the funds from the borrower's bank account automatically on payday is established. As a result, the lender is able to recoup the loan amount automatically.
Payday Loans Explained
Payday loans are unsecured loans based on the borrower's ability to repay the loan as opposed to more complex factors. While approval for traditional loans often depends on the borrower's credit history, income, debt-to-income ratio and assets, only the borrower's income is considered during the approval process for a payday loan. If you are seeking a quick way to borrow money, you should know that payday loans only provide a limited amount of cash and must be repaid in a short period of time. Most payday lenders require the loan be repaid in full by the borrower's next payday. The exception to this requirement is when the borrower's next payday is less than seven days after the loan is approved. In these cases, the funds typically need to be repaid on the second payday after the loan is approved.
A Quick Way to Borrow Money
A payday loan is one quick way to borrow money. The loan may be approved in as little as 24 hours. Payday loans are unsecured loans for a relatively small amount of money. These loans typically must be repaid within 10 to 15 days and have fees associated with them. The fees are usually a percentage of the total amount borrowed. If you are borrowing money with a payday loan, you will usually be required to fill out a brief application. The application may be completed online or in person and requires the applicant to provide information regarding identity and employment status. The applicant will also likely be required to provide a recent bank statement.
The application for a payday loan can typically be completed in a matter of minutes and because the approval process only involves verifying the applicant's ability to repay the loan, the lender can usually approve the application rather quickly. For example, many payday lenders guarantee applications received by 3 p.m. will be processed the next business day and if the application is approved, the funds will be distributed into the borrower's bank account on the same day the application is processed.
Obtaining Emergency Cash Loans Quickly
Emergency cash loans can be obtained rather quickly from payday lenders that offer small, unsecured loans. Borrowers who need cash in an emergency can often obtain a payday loan in as little as 24 hours. However, it is important to note there will often be limitations placed on the amount which can be borrowed. The dollar amount is usually limited to a range of $300 to $1,500 and is based on the borrower's net monthly income. This is because the lender is only willing to loan an amount of money which can be repaid on the next payday.
Comparing Payday Loan Services
One common mistake borrowers make is to assume there is no benefit in comparing payday loan services. The borrower may assume this is not necessary because the services offered are very similar, but there may be differences which can make one lender more appealing than others. The first factor to consider is the applicable fees and the loan terms. In making this comparison, the borrower should consider the total amount of money it will cost them to repay the loan in full. This will likely include the amount borrowed plus any applicable fees, such as application fees, processing fees or startup fees.
The borrower should also carefully consider the repayment period. Most payday lenders require complete repayment within two weeks. The loan is usually repaid on the borrower's next payday unless this payday occurs within seven days of the loan approval. Failure to repay the loan in a timely fashion will result in the borrower being charged interest on the outstanding balance on the loan. Therefore, it is important to compare interest rates even if the borrower does not anticipate having to pay interest on the loan.
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