Payday loans are becoming so common that they are practically a way of life for many people. If you find yourself in a situation that demands instant access to cash that you simply do not have, you may be considering a payday loan for yourself. If so, it is important to understand how these unique types of loans work before you jump in.
Defining Payday Loans
A payday loan is simply a loan that gives you access to part of your next paycheck right now. You have to be employed to receive this type of loan, and with many lenders you may have to show paycheck stubs to prove that you earn at least a given amount per paycheck.
Getting Payday Approval
If you are gainfully employed and earn a reasonable amount of money on a consistent basis, then you are qualified to receive this type of loan. You do not have to worry about passing a credit check or putting any of your valuables up as collateral, as the loan is simply taken off of an upcoming paycheck. It is essentially an advance on your pay, so your credit does not come into play.
Understanding the Process
Once you are approved for a payday loan and determine that you want to accept the offer, you have to give the loaning agent your bank account information so the money can be transferred directly to you. There will be a contract entitling them to automatically withdraw the pay back amount on a date which will be agreed upon at the time you take out the money.
You can expect the loan’s collection date to be on the date of your next payday, whether that is one week, two weeks, or a month away.
If you do not have a bank account through which the deposit and withdraw can go through, you might not be able to get a payday loan. The ability to automatically withdraw the amount owed on the due date gives security to the loaning agent that they will get their money back without having to track you down or drag you into court.
Most people go through online payday lenders since they are faster and more convenient, but if you need a paper check you may be able to go through a local lender who still operates in that fashion.
Problems That May Arise With A Payday Loan
As long as you take out a payday loan responsibly and are certain that the pay back amount will be in the account on the correct date, you will find this loan process to be extremely fast and very simple.
The biggest problem that can arise is a situation where you find out the money will not be in your account when it is due because of unforeseen circumstances. In that case, you can apply for the amount to be rolled over to your next payday, of course for an additional fee.
For most people with steady employment, these loans might be lifesavers in some of the worst situations of their life. They are typically used when a bill needs to be paid immediately to avoid a service shut off or when a purchase needs to be made but the money is not instantly on hand. However, payday loans can have exorbitantly high interest rates if payments are not meant and many people have gotten themselves into an even worse financial situation when their payday loan has not been repaid on time.