All You Need To Know About Payday Loan
Not sure what a payday loan is? Or facing issues related to a payday loan?
Whatever your concern is, you are on the correct page. We will discuss almost everything one should know about a payday loan and related aspects. A payday loan can come to your rescue when you are in an immediate or sudden financial crisis and feel helpless about your situation.
Anyone can get stuck in an unwanted situation where they get short of money. One finds no way out and feels depressed. However, to extend support to them, the facility of a payday loan or check advance loan, or cash advance loan is provided. If you want to borrow money immediately, a payday loan can help you. It is among the loans that are easiest to get approved. Let us know more about a payday loan.
Apply for Pay Day Loan – Get upto $1000 Instant Withdrawal in 30 Minutes
[contact-form-7 id=”95″ title=”Contact form 1″]
Introduction- What is a Payday Loan?
A short-term loan with a very high-interest rate that is based on your income. The principal amount that you borrow is somewhat equivalent to a portion of your paycheck. This is why it is popularly known as a payday loan. A lender will charge a borrower a very high-interest rate for a short term making money available quickly to them.
So basically, the amount of this payday loan for you depends on how much you earn per month. There are a number of laws that are drafted to regulate interest rates and high fees with payday loans.
These payday loans are a type of unsecured personal loans because they do not need any collateral and charge very high-interest rates to the borrowers. These can be helpful but risky at the same time. It is because of super high-interest rates that, may have hidden provisions that can charge additional fees to the borrowers, and do not consider if the borrower will be able to pay back or not. This is why these loans are sometimes considered as predatory lending. If you want to go for a safer option, then you can consider thinking about knowing some personal loan alternatives.
How To Get A Payday Loan?
There are a number of methods available for a borrower to get a payday loan. Some small credit merchants that own or sit on a physical store can provide you with a payday loan. They do let you fill credit applications on-site and get the approval for your loan. Also, there are some lenders available online and they can help you get a payday loan. There are some conditions that you must fulfill before getting a payday loan from any lender. This may typically include pay stubs that depict your current level of income from your employer. Some lenders may use a borrower’s wages or salary as collateral. After knowing your salary, a lender may draw a principal amount for you which is based on a percentage of your expected short-term income. It is not necessary that these lenders will fully check your credit or check whether you will be able to pay back the loan on time or not.
Interest Rates On A Payday Loan
As we have already discussed, a payday loan comes with a very high-interest rate. And to a borrower’s surprise, these can go as high as 780% in APR with a loan at an average of 400%. However, most states already have usury loans to limit interest rate charges from 5%- 30% but lenders that give payday loans are exempted and are allowed to charge high-interest rates to the borrowers.
It is true that these payday loans fall in where there are many loopholes and so the borrower must stay careful with these loans. Individual states impose or govern the regulations imposed on payday loans. However, 16 states of the United States and the District of Columbia have called off payday loans.
For instance, for a $100 loan, an APR of 460% can be charged for 14 days. Also, there are finance charges or fees applicable on these loans. For $100, a fee of $15 is charged as an average. Many people overlook these costs. However, as per the federal Truth in Lending Act forces payday loan lenders to reveal their charges. People can use these loans to complete liabilities that are short-term.
Generally, the loan amount ranges from $100-$1000 and the most common amount for a payday loan is $500. After the 2008 financial crisis, lending laws have come into the picture. This has been done to ensure a fair and transparent market. The interest rates on a payday loan are generally fixed. These loans are repaid in a lump sum amount when the paycheck is received.
What Is The Repayment Process For A Payday Loan?
Since the borrower does not give any collateral to the lender in a payday loan, the repayment can be done normally. The lender might ask for the borrower’s permission to take back money from a credit union, bank account, or prepaid card account. Or, in some cases, the lender might even ask the borrower to write a check in advance date so that it can get back the loaned amount whenever it is due.
Which 16 states have called off payday loans?
- New Hampshire
- New Jersey
- New York
- North Caroline
- South Dakota
- West Virginia
Other than these states, the District of Columbia has also called off payday loans.
Can I get a payday loan if I do not have a bank account?
Yes, it is possible. But in conditions where the borrower does not have a bank account, the lenders charge high-interest rates.
The Bottom Line- Payday Loan
This was all that you should know about a payday loan. As we have explicitly explained that these loans are only for the short term and charge very high rates, it is in the best of the interest to avoid these loans. It can eventually lead you to a pothole of unwanted debt because the additional fees keep on joining the amount. However, if you are very sure about your abilities to repay these loans, you can definitely go ahead to get these from any lender.