What You Need to Know About Payday Loans
If ever you need any emergency loan then you can apply for a payday loan, which is usually in the range of $500 or even less amount. This type of loan is a short-term loan and interest rates are very high if you fail to pay within time.
In this kind of loan, you may have to give an advance post-dated check as some lenders want to play safe. Further interest rates and the penalty for failing to pay back in time can be very high and sometimes it can be of the order of 400% too. Therefore, before taking the loan, you must read the agreement paper thoroughly and carefully.
What is a payday loan?
It is also known as cash advance, post-dated check loans, check-advance loans and can be obtained from many different sources. You can also apply online and the process remains almost the same. All that you need to do is fill up a form to provide your personal and financial details and give your request for the required amount. As a security you may have to give either post-dated check or bank account debit authorization to the lender and also the certain amount of processing fee. The amount required by you is credited to your account within a day.
Your lender will not check your credit rating for providing this type of loan however from 2016, certain new rules are introduced where the lender may try to assess your repaying ability. This kind of loans is for very small amount and the fees are depended upon respective state rules. Being a short-term loan, this type of loan is very costly.
How does it work?
Suppose your car suddenly broke down and you need to repair it urgently and you do not have enough cash with you and your repair bill is say $300. So, while applying for a loan you have to provide a post-dated check of $300 +$40 as a processing fee. The lender will then credit $300 to your bank and after 14 days the lender will deposit your check. In case, your bank balance is not sufficient to honor the check then you have to pay an additional penalty too.
Who can avail such loan?
As per the data available with us about 12 million Americans apply for payday loan every year. Any individual who has check account and has a steady salary income can easily avail this type of loan. Generally, those who do not have a credit card prefer to use such type of loan. People with bad credit or no credit can also get such loan.
What are the benefits?
In case of any kind of emergency situation like car breakdown or paying for hospital bills and similar such situations, people can apply for such loans. Particularly if you do not have a credit card or your bank balance is not sufficient then you can easily get this financial relief. Since, the lender never checks your credit rating, it is an easily accessible loan.
What are the negatives?
It is very important that your loan must be repaid within the due date. If you fail to repay then the penalties are very high which can be as high as 400% too.