What is Payday Loan and How It Works

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What is Payday Loan and How It Works

Sometimes things don’t go the way you plan, and you end up being in a tight financial situation. Payday loans are especially for such emergencies you can easily find the payday lenders, as nowadays it’s easier to apply for payday loans.

You can apply for a payday loans online, the application only takes a few minutes, and the decision is usually instant.

You don’t need good credit scores or even a credit history, and getting approved is smooth relative to other loans. As a result, they are popular with people facing financial difficulties.

Let me share you a brief idea about what is a payday loan and how it works. It can help you understand the cost and way to use the payday loans in emergencies.

Before you submit your application for payday loans, you should be aware of what and when can you expect? What will be the cost? And if a payday loan is a right option for you

What is a payday loan?

Payday loans have always been a quick solution for the short term to get through the tight spot. When you have no credit market options due to no prior credit history or no family connection payday loans always serves well in your emergencies.

A payday loan is also known as short-term loans or no credit loans and is designed to cover you until your next payday. You won’t need a good credit score or credit history for a payday loan to be approved, you can easily get the instant payday loans.

They are usually for a small amount, between $50 and $1,000, and paid within 30 days. The actual terms and the amount you will be able to apply for differs depending on the state you’re applying from, as does the Annual Percentage Rate (APR) that are applied to your loan.

If you have bought a home, you are well aware of how much documentation you need to provide to the bank before they approve you for a mortgage. And it’s not so with a payday loan. Most of the lenders will require only proof of your employment, like bank statements or pay stubs, and one form of identification. There are also lenders that allow you to apply forpayday loans online, and you can have an answer in a few minutes.

How does it work?

Most often, payday loans are for no more than a few hundred bucks and which needs to be paid back withina month or a couple of weeks. To get a payday loan, you will be writing a check for the amount you are borrowing, plus a fee. You might leave the cheque with the lender, and they cash it once you are ready to repay.

In case of not being able to repay the payday loan I, you can roll it over for next month or a week so that the loan will extend. You don’t have to repay it, but fees keep accumulating. Some states regulate rollovers by outlawing them or limiting the number of times you can renew. Before applying for a payday loan, it’s essential to review the laws in the state where you live.

  1. Compare your options

Firstly, finding the best payday loan provider by comparingrates, fees, and features. And so check if you meet the lender eligibility criteria.

  1. Submit your application

Submit the form with personal, employment, and financial details that are required.

  1. Wait for approval

After submitting your application,you will get a response in a few minutes. If your application is approved, you’ll receive a loan contract to agree.

  1. Receive your loan

Once you sign the loan contract, you can expect to receive your credit in one to two business days, or on the same day (depends on lender policy). Usually, the amount will be transferred into your bank account, but some lenders give you the option to pick up the cash.

  1. Make your repayments

One of the standard methods of repayment of a payday loan is providing personal cheque. But if the lenders don’t have a physical branch, you may need to sign an ACH authorization so the lender can debit repayments from your account.

Costs of payday loans

In general, payday loans are expensive compared to traditional loans. You may end up paying an annual percentage rate (APR) that exceeds 100 percent several times over.

For example, you might pay a $20 fee to borrow $100 for two weeks. Depending on all of the terms, that calculates to an APR of more than 500 percent.

About the Author

Christian Taylor, is a communication assistant at Spondooli – one of the leading payday loans lender company in Australia that provides fast money in emergencies with cash advance service.