Info about Lending
The Basics of Payday Loans
Do you need a loan to take care of a little money problem? If you don’t want to borrow from mom or dad or from a friend, then a payday loan may be the solution. A payday loan is an unsecured loan for a minimal amount and has to be repaid by the following payday, that is, in a maximum of 14 days (or 30 days in a few cases). You can use it for practically any purpose, such as for car repair, a medical bill, or perhaps to settle another loan. Payday loan companies’ websites have mushroomed on the Internet, making a payday loan easier to obtain, more so because processing requirements are very relaxed and do not require a credit check.
Payday loans are primarily designed to meet minor financial needs that an employed person may have that cannot wait till next payday. The processing requirements are minimal and you don’t have to put up collateral. As far as the lending company is concerned, your employment details are enough to get your loan approved. Lenders may vary according to the amount of the loan and the APR. However, because of stiff competition among the numerous payday loan companies, they have to sweeten the deal for the customer by offering attractive rates.
The criteria are simple: an applicant has to be an American citizen, at least 18 years old, employed with an income of at least $1000, and has a checking account. When you file your application, you have to give your employment information and a check postdated for the amount. After verification of the information you provided and establishing your eligibility for the loan, the lender will approve your loan right away. The maximum amount that will be lent is $1000. If you prove to be a reliable customer, some lenders will increase the amount of the loan the next time you apply for it.
The loan processing is simple; the loan amount is usually credited to your checking account shortly after the loan is approved. The post-dated check that you attach to the application will be for the amount of the loan plus the additional charges. The lending company will only encash this check on the same date that the check is dated. Borrowers who may have difficulty paying on the due date may have it extended by paying a fee for renewing the loan. This is called the “roll on” system.
The main drawback of the payday loan is its exorbitantly high APR, usually from 390 to 780%. If you need to avail yourself of the “roll on” system, you would end up having to pay an amount much higher than the original loan. At any rate, for the protection of borrowers, the Truth in Lending Act requires that the lender disclose in writing the total cost of the loan including the APR, finance, and all other charges to the customer when he applies for the loan. But considering the cost of the loan, one may resort to it only after thoroughly considering every angle, and when it seems to be the most practical option.