Payday Loans: Their Nature and Definition
If you have heard about payday loans, you have probably researched a little about it. You may have found yourself in a situation where you need a quick fix, and thankfully, payday loanswill be enough to help you out. As long as you pay them back before the deadline, you could, most probably, make them your go-to short-term loan system.
Payday loans are typically unsecured, meaning there is not much tying you to them. You do not send in collateral like your car or house. Theyrequire only enough proof that you can pay when you need to. Beyond that, you really do not lose much if you don’t have the money. However, the risky factor is the interest rate that will keep going up, ending up several times more than the initial cash you borrowed, which, of course, may take you forever to pay or put you in perpetual debt for a very long time.
Payday loans are usually between $300 to $400, not very huge sums of money, and the interests are charged solely based on the lender’s prerogative, making payday loans a risky venture for the creditor as well.
There are two major types: those you can get online and from a store. Online payday loans are more hazardous with respect to the amount of money you pay at the end of the day. This is because online payday loans use acomplicated system. You apply online, send in your documents, the online payday loans receiving group checks them, and your interest rate is discussed, giving the loan to the highest bidder. There is no telling how much you will pay for the loan as it differs from lender to lender. What you do is meet the people at a store, they peruse your documents, and based on them, give you a rate. After that, you are told the amount of time you need to pay back, and then the money is sent to you in record time, once all your documents are set. The process is not cumbersome, and you are definitely assured of response in good time, making this loan system a rather rapid one, despite the risks involved.
Payday Loans: How They Work
As mentioned before, these are short term loans given in due course for a short time. They are usually smaller amounts compared to what is required from a bank loan, and they take minutes to process. The procedure is generally a smooth one, and youwon’t notice anything going wrong until it is time to pay and you do not have the money. The major risk is the possibility of you giving far more than you borrowed.
Payday loans, as mentioned before, are really simple to get. What is required is your valid bank account, your ID card, be at least 18 years old, recent payslip, which shows the amount of money you earn, and an algorithm that checks if you are likely to repay the money. For direct payday loans no credit check is needed. Simply send in the documents; then you are good to go. You usually do not require much more than that.
For online payday loans, though, things could get a little more intense as you may be asked several questions, including your credit score, in order for the lenders to ascertain if you are likely to payback in time. Due to the indirect nature of online payday loans, it takes a longer time to be processed.
Once it is approved, you are given a deadline for your future payments. This time usually is dependent on when your next paycheck is due, resulting in the name ‘payday loans’. Generally, the loan you require is a percentage of your salary, meaning you can only request an amount that is well within the range of your monthly income. You are required to leave account details, or at least a standing order permitting the lender to make withdrawals on your behalf, should you not show up on the day you were meant to. If you do not show up, the lender goes on to make those withdrawals, plus the interest accrued from the delays of your paying. The lender can choose to deduct the full amount or break it up into smaller chunks so that he/she could take a little at a time. This happens until you are able to pay the money you owe. Otherwise, the case could involve lawyers, and a civil court, and unfortunately, you may not be able to request a loan for the longest time, until the bill is settled.
For the online payday loans direct lenders are usually scarce.Thus, the failure to repay the money could escalate fast, especially since there is no real collateral to ensure that the lender does not lose any money. This is why your credit information is of the utmost value when applying for payday loans online.
What You Need to Do to Be Approved fora Payday Loan
You should, first of all, be above eighteen before you are even be considered for the loan. Secondly, you need to have all your documents intact—bank statements, credit information, especially if you are applying online, a good-paying job for over 6 months to a year, or any period dictated by the lender. These payday loans are usually given by faith, so your story has to check out if indeed you need the loan. You should also be ready to provide additional documentation if asked, and be available to meet if it becomes necessary.
A bank account, or at least a payslip, which is above $500, is a good way to ensure that you will get approved, as long as your loan amount is well beneath it to verify you can potentially cover the interest if any delay happens.
How Long Does It Take for Your Payday Loan to Get Approved
One thing that makes the payday loansa go-to option is how quickly they are processed. Most people are guaranteed payday loans within a good ten to fifteen minutes. The processing may take up to a day if the loan has been requested online. This is because online payday loans take longer to go through all the processes before finally being approved. However, even with that, usually a day is the longest waiting time.
The Number of Payday Loans You Can Get
You can only get one payday loan at a time. This is because one of the requirements is to be sure you have no outstanding amount to pay. Online payday loans may not be granted if you have a poor credit score. It is difficult to get payday loans for bad credit because there is no telling if you would actually pay up. Therefore, one payday loan at a time is what is allowed.
What Are the Charges for Payday Loans?
When it comes to what can be charged for the payday loans, it is usually at the discretion of the lender. There are some states, however, which have tried to set the amount you could charge, asking that lenders do not go beyond thatto reduce the charges. Some creditorsrequire an average 15$ on every $100. Some could go as high as $23 on each $100, making it more expensive. The lenders are even finding ways to override these financial caps which have been set by the state. They could add all sorts of fees to make up for the liability they face if the borrower is unable to pay up on time.
Payday loans get especially expensive if the borrower fails to make payment. A person can accrue an interest rate of up to 30% of what he/she borrowed. These additional fees can truly cripple a person, especially if no plan was set in place to make payment in the beginning. You could easily end up owing up to $16,000 on a $2000 loan. The best way to avoid additional charges is to pay up on time.