A Whole Lot of Payday Loans
Nowadays, payday loans are becoming more and more popular among Americans. But what are they like? When to use one, and how do they work? If you are really interested in payday loans and wanna know everything about them, stay tuned.
Payday loans are short-term loans that should be paid within a month. The term “payday” refers to the borrower’s upcoming paycheck, as he should repay the debt as soon as he gets his next income. Payday loans come with high-interest rates, which are calculated as a percentage of the loan, so the larger the loan, the longer the term, the more interest the borrower should pay.
Payday loans are also called “payday advance,” “salary advance,” “salary loan,” “small-dollar loan,” “salary loan,” or “cash advance.” All these terms refer to a small payday loan, the amount of which ranges between $100 to $2500. Payday loans are considered unsecured loans as the lenders never require collaterals for the amount lent.
How to Obtain a Payday Loan?
Consumers should fill out an application form suggested by the website that owns a network of third-party lenders. Documents or paperwork is not needed. The borrower should only share some personal data, such as date of birth, social security number, government-issued ID, home address, phone number, email address, active bank account, and an income source.
After the client submits the completed application form, the website gathers the data and provides it to third-party lenders. They review the information simultaneously, which increases the chances of the requester getting approved. As soon as the lender approves the claim, the money is deposited directly to the borrower’s bank account.
Requesters with low or no credit history at all are still eligible for payday loans, as the lenders do not run hard credit checks while making the approvals. Payday lenders often use applicants’ income as an alternative way to estimate the risk of providing a loan.
Regulations on Payday Lending
The Consumer Financial Protection Bureau regulates payday lending and is supposed to protect the consumers by compelling the payday lenders to provide money with no more than a 391% interest rate.
Moreover, before applying for a payday loan, the borrowers should check Payday Lending State Statuses to see whether payday lending is available for their state.
Small Advice to Borrowers
Though payday loans are considerably easy sums to pay your unexpected bills, you should be careful while applying for them.
- Never take out a payday loan unless you are sure you can afford repayments on time. If you cannot repay your payday loan on time, you may face extra charges.
- Never take out a payday loan in a continuous way. Payday loans can become addictive. You should control the process of repaying the amounts on time; otherwise, you will be charged extra fees each time the same loan is prolonged or rolled over.
Pros of Payday Loans
- They are easy to obtain.
- They have fewer requirements than traditional bank loans.
- They don’t require credit history verification.
- They are unsecured loans.
- They are checked out within a few minutes.
Cons of Payday Loans
- They come with high-interest rates.
- They don’t solve significant financial issues.
- They can easily lead to a cycle of debts.