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Payday Loan Advantages
By: Max Hunter iSnare Expert Author
In the past few years, advertisements for payday loans are popping up everywhere
– on store signs, in newspapers, on billboards, and especially on the Internet.
Some payday loan companies advertise by direct mail, so you may even see ads
arriving in your own mailbox.
Sometimes they’re called cash advances, payday advances, check loans, or even
post-dated check loans, but all of those terms mean essentially the same thing –
a loan to carry you over until your next payday. While you’ve seen the ads, you
may not know what payday loans are, how they work, or how to go about obtaining
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 plus side, payday loans are easy to apply for, and easy to get. Borrowers
are asked to fill out a short application form that includes where they work,
their home address and telephone number and monthly income. Applicants also
provide information about their bank account, including the name of their bank
and their account number. In general, the application is much simpler than those
required by traditional banks, and less verification is required.
Borrowers are asked to provide a recent paystub, their latest bank statement,
and a copy of their driver’s license. There is no credit check involved, which
shortens the time frame considerably. The entire process takes just a few
minutes, instead of days or weeks, and can be approved on the spot, resulting in
the borrower receiving a cash loan in approximately half an hour. Once approved,
the borrower writes a post-dated check for the date of their 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.
The other major advantages to getting a payday loan are that there is no
collaterol required and no credit checks involved. Payday loans are available to
people who are working, whether or not they have good credit or are current with
all their monthly obligations. A person can qualify for a payday loan even
without owning a home or a car, or any other form of real property.
Payday loans can be especially valuable in an emergency situation. Maybe your
car breaks down or you have an urgent medical need and the unexpected costs were
not anticipated in your monthly budget. Nearly everyone finds themselves in an
occasional situation where they absolutely need some extra cash and don’t have
savings or other resources to tide them over. In those 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.
Is there a downside? Of course, as with any type of borrowing and lending, there
are disadvantages to payday loans. 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. 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, 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 contemplating a payday loan, it is important to shop around, make
sure you understand all of the fees involved, and make sure you borrow only
enough that you can pay it off in full by your next payday.
About the Author:
Max Hunter is the author of many credit related articles. If you are looking for help with Payday loan or any type of faxless loans please visit us at http://www.PaydayLoanChoice.com |
