Payday loans are short term loans that are expected to be paid back within 2 to 4 weeks. Also referred to as cash advances, these loans have a short repayment period and high-interest rates. They were initially intended to help individuals deal with emergencies that could arise before the pay check. Nevertheless, individuals have deviated from the primary purpose of these loans. Statistics show that many uses them to cover ordinary expenses such as rent.
All financial experts will advise you to avoid these loans for an excellent reason. Instead of helping to address your situation, these loans will only make your condition worse. With low-interest rates and high-interest rates, individuals often find it challenging to provide for themselves once the loan has been paid. They remain with the very little amount that may not cover their expenses through to the next paycheck. As a result, they end up reapplying for the loan again. When this happens repeatedly, they find themselves in the vicious cycle of payday loans. In this case, they may not be able to live without the loan.
We do not say payday loans are bad. You only need to be careful not to ruin your financial condition completely. In times of emergencies, these loans can work for you correctly. It is so easy to access payday loans. While lenders check your credit, they do not put a lot of emphasis on it like what traditional lenders do. The application process is quite easy with approval only taking minutes the application is successfully submitted. Some lenders only take two hours from the time the application is approved to deposit funds into the accounts of clients. If you are looking for a way to break down how much money you need to pay in total over your loan term, amortization calculator would be of great help. It is this convenience that has made payday loans desirable and popular. Let us see how it works.
How Payday Loans Work
Payday loans may be branded differently. They might be referred to as cash advance or check advance loans. Irrespective of their name, these loans work in the same way. A borrower is often required to process a post-dated to the lender. The check should cover the loan amount as well as all the fees involved. Still, the borrower may take the option of authorizing the payday lender to debit his checking account electronically. The lender responds by giving out funds. In case the borrower does not repay the loan within the agreed period, usually 2-4 weeks, the lender has the option of cashing the check or debiting the checking account of the borrower.
Ideally, the loan is supposed to be paid by the next payday. Nevertheless, in case the borrower cannot afford to do that, there is always an option to roll over. This option will temporarily save you from stress. However, it comes at a high cost. For instance, a loan worth $100 attracts a rollover cost of $30. This makes the loan even more expensive and unaffordable. Besides, the loan comes with other fees that you will be required to cover. There are cases where borrowers are required to non sufficient funds. This usually happens when they do not have enough funds in the account to fully pay the loan. There is also a late fee payment in case the loan is not paid back in time.
The Requirements
The lenders of payday loans are not so demanding like traditional lenders. While they check credit, they do not focus a lot on that. In fact, it can be said that a credit check is partial. Usually, a borrower is required to meet the following conditions to be approved.
· An active bank accounts
· Be or the legal age
· Proof of income
· Steady job
If you meet these requirements, you will only be required to apply for the loan online. The application forms are often available on the borrowers’ websites. Filling the application form usually takes a maximum of 15 minutes. Ideally, funds are deposited by the next business day. However, in case of approval was made early in the day, borrowers can even access funds the same day. Some payday lenders take even two hours to deposit funds. In case you have a good debt to income ratio, you can apply for other loans.
Consider other alternatives
We have repeatedly mentioned that these loans may detriment your financial status. Many had good reasons for applying for the loan. However, they became victims of the vicious cycle of payday loans. It can be so hard to get out of payday loans, and that is why you should consider them as a last resort. Before thinking of applying, try the following options.
Credit Unions
Credit unions are primarily organized to improve the welfare of members. There are more likely to listen to lenders who are plagued with emergencies. While approval and processing of loans often take longer, if you talk to them directly about your condition, they are more likely to come to your aid.
Banks
Like credit unions, banks can offer you an emergency loan. However, you will be required to have excellent credit to be considered. If you have a good standing before your bank, talk to the loan officer about your situation.
Family and Friends
Where should you turn to first in case you are in dire need of funds? Undeniably, friends and family members can understand you better than other parties. They can help you through the hard times without being so demanding. They cannot ask for such things as credit score and proof of income. Many individuals do not prefer this option because of the need to safeguard their privacy. But it is better compared to payday loans.
The Bottom Line
Payday loans are short term cash loans that are supposed to be paid within 2 to four weeks. It takes a short time to be approved for payday loans, and that is why they are sometimes referred to as emergency loans. Nevertheless, these loans are quite expensive, and they can damage your financial condition even beyond repay. Consider payday loans only and only as of the last resort. But in case you need cash instantly, go to this website and get an instant approval.
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