Payday Loans are used by many across the United States to gain a little bit of extra money to help in their day to day lives in a pinch. They are a short term unsecured loan, sometimes referred to as a cash advance.
Contrary to the name, these loans are not required to be tied to a person’s designated pay date. The name is derived from the fact that the borrower must have current payroll or employment records to be approved for the loan. Charges for these loans range from $15 to $50 depending on the amount borrowed, and due to these low costs allow borrowers at any income amount to participate. These loans provide a great service at an affordable cost.
How does a payday loan work? These loans are issued by a lender in a short term manner, oftentimes as soon as the borrower’s next pay date. The borrower proves his or her employment status via a pay stub or other lender accepted document. The borrower will then write a check dated for the loan due date and paid to the lender of the full loan amount plus interest and fees. The loan amount is granted in full to the borrower immediately. The borrower is required to return to the physical location or online website of the lender and pay the loan plus any interest or fees in full on the due date. If the borrower does not return on time the aforementioned check will be redeemed. If this check bounces due to insufficient funds in the borrower’s bank account additional fees or an increase to the loan interest rate may occur.
Payday Loans can be used for a plethora of reasons, the most common being to cover unexpected expenses. Not everyone is capable of maintaining an emergency fund of money stashed away and these loans provide a great solution in a pinch. Other reasons may be to avoid dealing with a lengthy approval process from a bank or other financial institution. Some borrowers do not meet credit check requirements for a traditional loan and are searching for a better option. Payday loans do not require a credit check at all! These loans can even be utilized to cover day to day expenses such as utility bills and groceries. A borrower could even go to a payday loan lender to avoid needing to ask a friend or family member for extra money. At the extreme end of things, when someone has no other option to cover an expense these loans will always be available.