Payday Loans – How Do They Work
Payday loans are a convenient option to get some cash quickly when you have a dire need. Whether you need funds for carrying out breakdown maintenance on your car, for paying overdue hospital bills, or for paying for a child’s school/college fees, sometimes you just cant wait until your payday.
That’s when payday loans, also referred to as cash advances, come in very handy. A payday loan is a type of short-term, small loan (ranging from $100 to $1,000) that you can avail even if your credit record is not very good and you are not in a position to get a traditional loan.
Eligibility Criteria for Getting Payday Loans
You will qualify for payday loans, if you satisfy the following requirements:
- You must be 18 years old or above.
- You have a steady income of at least $1,000 for a minimum of three months. You may receive your income from an employment or by way of federal or state assistance, for example, disability payment.
- You have had a checking account for the last three months.
Understanding How Payday Loans Work
Typically, payday lenders are financial services companies. They often have a store, but they may also allow you to apply online or by phone. You are not required to fill in any bank loan application.
Typically, payday loan applications call for your employment, contact and banking information. A payday lender will also require you to provide contact information of some of your friends and family so that they call them if you do not repay the loan.
You need to write a check in favor of the lender for the amount you wish to borrow. If you are applying online, you have to give a pledge that you will pay the borrowed amount by a specified date. Finance charges to the tune of $15 per $100 borrowed will be added by the lender.
Once your application is approved, the lender will deposit the money into your bank account. Alternately, they may give a check for the borrowed amount. Your check will be under the custody of the lender during the loan period which may range from two weeks to one month.
On the completion of the term, the payday lender either debits your bank account or cashes the check, completing the repayment of the loan along with the fee.
If you are not in a position to repay the loan by the specified time, you can extend the repayment period by another term. However, the lender will charge additional fee for extending the repayment period.
Payday loans are very attractive because they are easily available. One of the major advantages that payday lenders have over banks is flexibility. They provide services at more locations and for longer hours when compared with banks. Some lenders are even open for 24 hours a day. Further, payday lenders rarely do any credit check. Additionally, the loan applications are processed in about an hour. However, you should use this facility only in an emergency situation as the interest rates are often extremely high.