A payday loan is a loan given to the borrower by the lender with the next paycheck of the borrower as collateral. They are short term loans and the most widely used time span is 2 weeks. They can be rolled over as well if the borrower cannot pay the money on time.
Why do people use payday loans?
Most people use payday loans to meet an immediate monetary crisis. If someone needs cash at hand instantly, say for medical expenses or some unforeseen expense that he or she has to meet, then a payday loan can be useful Payday loans are available in all parts of the United States and the normal interest charged is $ 15 to $ 20 on every $100 lent.
It is easy to qualify for payday loans. The criteria in the United States are as follows:
- One has to be a US citizen
- A paycheck of $1000
- A source of regular income
- Ownership to a checking account with direct deposit
Payday loans are processed quickly. One just needs to submit a few documents. There are many companies in the United States that give out payday loans. One can simply log on to a website of a company offering payday loans. For example, on a loan of $500 for 7 days, one has to pay $37.50, which comes to a 7.5% interest payment. Similarly, for 14 days, the interest comes to $ 75, which is 15% interest. Studies have shown that people living in a disaster struck area have recovered faster where payday loans were available compared to in areas where payday loans were not allowed.
Even customers with bad credit history can take advantage of payday loans. All one needs to have is a guaranteed immediate paycheck to pay off the loan. Also, one can make the payment of the loan via a post dated check. It will be cashed on the date mentioned as the date of return for the loan.
Payday loans use an annual percentage rate basis. Since the term for the loan is short, the difference between the annual percentage rate (APR) and effective percentage rate (EPR) can be substantially different. So, many states in the United States have limited the annual percentage rate (APR) of payday loans.
How can I get a payday loan?
One can easily get a payday loan online or by personally approaching a lender. Many high profile finance companies offer payday loans and they can be contacted via email. The loan can be applied for online with only a few documents, like identification etc. and all this can be faxed to the office of the lender or financial company. One can also calculate the interest on the loan on these financial websites by filling in the loan amount and the period for the loan. So, one can make an informed decision about the loan that one wants to select.
However, one must be aware of the problems of payday loans. They have exorbitantly high interest rates. They also cause a rise in credit accumulation as the payment for the loan can be rolled over again and again.
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