What It Is

In the past few years, advertisements for payday loans are popping up everywhere - on billboards, on store signs, in newspapers, and especially online. Some payday loan companies advertise by snail mail, so you may even seen some ads in your own mailbox. There are some Payday Loan Advantages though.

Sometimes they’re called payday advances, check loans, cash advances, or even post-dated check loans, but all of those terms mean exactly the same thing - a loan to get you by until your next payday. While you’ve seen the ads, you may not know what payday loans how they work or what they are, or how to go about applying for one.

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 good side, payday loans are easy to apply for, and get. Borrowers are asked to fill out a short application paper that includes their home address, where they work, telephone number and monthly income. Applicants must also provide their bank account, including the name of their bank and their account number. In general, the application is much easier than those required by traditional banks, and less verification is required.

Your will be asked to provide a recent pay check stub, your latest bank statement, and a copy of your driver’s license. The entire process takes just a few minutes, instead of days or weeks, and can be approved on the spot, resulting in you receiving a cash loan in approximately half an hour. There is no credit check involved, which shortens the time frame considerably. Once approved, you will write a post-dated check for the date of your next payday, and for the amount borrowed, plus the lender’s fees.

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.

Other payday loan advantages to getting a payday loan are that there is no credit checks involved and no collateral required. Payday loans are available to people who are working, are not current with all their monthly obligations. or whether or not they have good credit A person can qualify for a payday loan even if they don’t own a home or a car, or any other form of real property.

Payday loans can be especially worthwhile in an emergency situation. Maybe you have an pressing medical needs or your vehicle breaks down and the immediate costs were not in your monthly budget. Almost everyone finds themselves in these types of situation where they seriously need some extra money and don’t have other resources or savings to tide them over. In these 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.

Of course there Is a downside. As with any type of borrowing and lending, there are disadvantages to payday 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, they cost more than traditional loans because lenders are allowed to charge higher loan fees or finance charges, for short-term, unsecured loans.

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 going to apply for a payday loan, it is important make sure you understand all of the fees involved, to shop around, and make sure you borrow only enough that you can pay it off in full by your next pay check.