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What Is A Payday Loan?

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There are a wide range of borrowing options available to the average consumer, with the internet making more of them more accessible than they have ever been before. Traditionally, it was hard to get a loan that wasn’t for a large amount or long-term, which means that everyday people facing cash flow problems didn’t have very many options. That has changed with the growing popularity of new alternatives, and payday loans are chief amongst those growing options.

What Is A Payday Loan?

Payday loans are short-term loans that tend to offer smaller amounts of money than most traditional loans. While there are high-street lenders that can offer them in person, the majority of payday loan providers operate online, with many of them being exclusively online. They are typically used to work as an advance on your paycheck. You borrow the money when you need it, and you are given a short period of time to pay it back in full with added interest, usually within a month.

In many cases, a check is written and given to the lender covering the full cost of the loan (the loan itself plus interest and fees). Then, when the due date for repayment comes around and if the borrower is ready to repay, the lender can cash the check.

Most payday providers offer rollovers for loans if the borrower isn’t able to repay it by the due date, as well. Depending on the borrower you get a payday loan, as well as state regulations, there may be limits on how many times a loan be rolled over, while they are outlawed and inaccessible in some parts of the country.

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The Advantages & Disadvantages Of The Payday Loan

One of the key advantages of the payday loan is just how accessible it is. They are widely available an easy to apply for online. What’s more, loan approval and transfer of the money tends to happen very quickly, often on the same day as the loan application. This means that they can be particularly helpful during emergencies, where waiting is not an option.

What’s more, payday loans are even more accessible because they tend to be easier for those with bad credit or no credit history. Your credit will impact how much you can borrow and the terms on repayment, but you might not have any options elsewhere. As a result, payday loans can be useful for building your credit history, as well.

There are disadvantages to every kind of loan and with payday loans, there is a higher interest rate than longer-term loans. For this reason, it’s crucial that borrowers fully understand the interest rate, any fees, and other terms of the repayment. To keep your credit score healthy and to avoid debt, calculate your repayments in advance to ensure that you can meet the terms of the loan agreement.

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What You Need To Apply For A Payday Loan

As mentioned, it’s relatively easy to successfully apply for a payday loan and to end up with the cash you need on the next day, or sometimes the very next day. However, there are still some restrictions and some things you need to apply for them. For instance, payday loans are not available to anyone under the age of 18. Furthermore, you need to have an active and valid checking account. You also have to have to be able to show proof of income. Lastly, you need to have a working and valid phone number.

Besides that, there are few requirements on getting a payday loan. Your credit score can affect which loans are available to you, but even those with poor credit or no credit history whatsoever can usually end up with a successful application.

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Getting The Best Payday Loan

There are plenty of <a href=”/”>different payday loan options</a>, even from one provider alone. To make sure that you get the very best loan you can with the best repayment plans, it pays to scan the market and see which lenders offer the best interest rates and the least hidden fees and extras.

Beyond that, there are a lot of ways that you can further customize your loan. First of all, there is some flexibility in the repayment period. Usually, payday loans are paid back on or around your next pay day, which is fixed to your pay cycle. So, if you are paid weekly, bi-weekly, or monthly, you can get a loan that fits that as best as possible. This means that you can pay it back when you have the cash on hand.

There are different options for how you pay it off as well. In physical stores, you can leave a post-dated check which the lender will cash on the due date if you’re able to pay. Otherwise, you can pay by debit card, automatic payment from your bank, or a cash payoff depending on the options provided by your lender.

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How To Borrow Responsibly

Payday loans can be very useful to those who need them. If you want to avoid bounced check and overdraft fees, to use it for daily essentials, home repairs, or other emergencies, you should consider them. However, if you need a large amount of money, a long period of time to pay back your loans, or you want to continue borrowing money, other options like a bank loan or revolving line of credit (such as a credit card) may be more suitable for you.

To ensure that you borrow responsibly, only borrow as much money as you need, even if you are approved for more and only take it out if you can afford to pay it back on your next payday. Most importantly, study the conditions and fees before accepting a loan.

A payday loan can be an invaluable tool for dealing with costly emergencies or for getting the funding you need for essential one-time purchases. As with all loans, responsible use is the most important factor when consider the options available to you.

About Kelly Stone

Kelly is a graduate of Northwestern University's Kellogg School of Management with a Master's Degree in Finance. Kelly has 20+ years experience in the short-term lending industry since 1996, having owned 50 storefronts offering payday loans. As President of Snappy Payday Loans, Kelly has built a large network of lenders and is dedicated to ensuring consumers nationwide can find the loan they are seeking. View More