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Payday Loans

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Published: 28Feb2008
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A Guide to Payday Loans

Most all of us, regardless of how careful we may be with our money, have found ourselves short on funds before our next paycheck arrives. Often times, one medical emergency, forgotten bill, or unexpected financial situation is all it will take to completely drain any available savings, leaving us vulnerable, unable to meet the rest of our obligations, and quickly falling deeper into debt.

Fortunately for many, there is the option of payday loans, which bridges the gap between paychecks, enabling one to essentially borrow their own money before they normally would have received it on their next payday. Most payday loan lenders also do not check a person's credit report or history during the approval process, which is beneficial for those of us with either little or less than perfect credit.

What Exactly is a Payday Loan?

Payday loans are short-term loans that, unlike those issued by a traditional lender such as a bank, do not require collateral, but instead use your next paycheck as a guarantee for repayment. There are also those cash advances, payday, or paycheck loans as they are sometimes called, that are geared toward people with either no or bad credit, making it possible to be approved for a small loan that a bank, credit union, or other similar lender would have otherwise denied.

The terms and conditions of payday loans will vary by lender, but generally speaking, there are several different criteria, such as meeting the minimum income requirements or having a steady job, that must be met in order to be approved. Borrowers must be at least 18, have a verifiable form of steady employment, a valid bank account, and Social Security number in the U.S. Most lenders will also require that potential borrowers must have had the same job and place of residence for a period of the past three months, although others stipulate six months or more.

Of course, much like any type of loan, there are fees for taking out a payday loan that should be fully understood before you apply for approval to avoid any unpleasant surprises. Interest and finance charges can often be substantial, and are usually anywhere from 15 to 30 percent on every hundred dollars borrowed.

Other important facts to know are the date the loan is due to be completely repaid, and the amount and number of payments. Although funds are usually debited electronically, borrowers are usually required to write a check, dated in advance for the full amount of the loan, which will be cashed by the lender on the agreed upon repayment date.

What are the Benefits of Payday Loans?

Some of the most attractive benefits of payday loans are the ease of the application process and the time it takes to actually receive the money. Thanks to advanced technology, most all companies allow one to apply either using the internet or the telephone, and learn if they've been approved or denied in as little as 24 hours, most usually within minutes. Notice can be sent through the mail, email, or via the fax machine, which is helpful as you'll want to keep a paper copy of the details of the loan for your records.

Many lenders feature electronic transactions where the funds are automatically transferred into the bank by the end of the following business day. In fact, many companies require that the borrower's bank account be capable of electronic transactions in order for approval, as several payday lenders require electronic repayment, which does allow you to easily repay your loan without the need for writing out another bill and sending a payment in twice a month.

Extensions are another benefit of payday loans, which allow you more time to repay the loan, although there may be additional fees for the privilege. Extensions are usually granted for two weeks, also the most common length of a pay period, but some loans are for four weeks to begin with, without the need for an extension, or the added fees.

If your credit history is less than desirable, another bonus of payday loans is that there are no embarrassing financial or personal questions to answer, as well as no involved forms to complete. But, by making timely payments and keeping your account in good standing, you'll eventually be able to improve your credit in general, and be able to borrow more money as you continue prove your credit worthiness to lenders.

Using payday loans wisely and responsibly for paying bills, taking care of emergencies, avoiding steep late fees, or for keeping an important account in arrears will allow you to protect your credit rating, and meet your financial obligations should the need ever arise.

For more information please visit Payday Loans

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