Payday Loans - Bridge Your Cash Needs Between Paydays




A fast and sure way to take care of emergency cash needs is to avail of a payday loan. A payday loan may also be referred to as post-dated check loan, or deferred deposit check loan. In the United States, the Federal Trade Commission calls it costly cash.

In fact, it is a short term cash advance to tide over expenses cropping up all of a sudden, like a big repair bill for the car, a medical bill, emergent travel expenses, meeting day to day expenses or any other expenditure that may require to be met at short notice. It is not intended to cover financial problems that may be of a long-term nature, which may be resolved by consumer credit counseling.

The services of a payday loan company are usually sought when there is a sudden urgent need for cash, which may not be available from any other source. There are about 10,000 payday loan outlets operating in the United States.

The Internet is a good source for finding an outlet or store near a borrower’s place. Care is taken by these companies to locate their outlets at accessible locations, and to keep their working hours flexible and different from banking hours. Telephone calls to the payday loan store, a visit to their outlet or an online application are the some of the ways to apply for a payday loan.

Usually a payday loan is limited to a small amount; anywhere from $50 to $500. On approval, the loan amount is deposited directly into the bank account of the borrower within 24 hours of the submission of the loan application. The borrower can rest assured that confidentiality with respect to the transaction is maintained.

The lending terms for these loans are structured to be hassle free. Credit rating has no bearing on the approval of the loan application and in many cases no credit check is done. So, a borrower with bad credit may also qualify for the loan. The borrower just needs to be at least eighteen years in age, and should have a full time job with an income of above a thousand dollars per month. He or she should be a US citizen with a checking account. Post-dated checks are generally given to the lender against the loan.

An advantage of a payday loan is that they are renewable and extendable. The loan is repayable on the next payday of the borrower. There are multiple options for paying back the loan. The lender is allowed to cash the checks given as security, or repay the loan amount personally at the office of the lender. However, if either of the options is unfeasible, the borrower can approach the lender for an extension of the payback date. Usually, however, such an extension is permitted only twice.

The interest rates for these loans are exceptionally high. To give an example: if a loan for $100 is taken for 14 days, which is the next date for one’s paycheck, then the amount to be paid back would be $115. The annual percentage rate of which, on calculation, turns out to be a whopping 391 percent. In case of extension of the payback date, the rates would go higher.

So, the desirability of a payday loan would depend on the urgency of the borrower’s need and his capability to bear the interest burden. While payday loans are a fast and sure way to solving unforeseen urgent credit needs, on the other hand, they carry an exceptionally high interest burden.

