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Everything You Need to Know about Payday Loans

Payday loans provide a quick and easy method for people to obtain money without going to a bank, especially if they have bad credit. Unfortunately, this type of borrowing can lead to a vicious cycle that increases the borrower’s existing level of debt. Payday loans are generally provided by stand-alone businesses, such as check cashing companies, rather than by financial institutions and banks. They offer ready access to quick cash with few strings attached.

What Is a Payday Loan?

Payday loans are short-term loans that typically provide a small sum of money ranging between $100 and $1,500 to a borrower. Since this type of loan is obtained with the promise to repay it at the time of the borrower’s next paycheck, it is referred to by a wide variety of other names, including cash advance, payroll advance, check advance, post-dated check advance, and deferred deposit check. Payday loans are legally binding, and they do not require the borrower to have any collateral or savings.

Is a Payday Loan For You?

How do you know if getting a payday loan is right for you? If your need for immediate funds is a temporary one, a payday loan could solve your financial dilemma. It’s important that you are going to be able to repay the debt in full at the time that it is due. Payday loans should be used as a last resort, simply because the fees attached to them are so exorbitantly high. If you can borrow the money from a family member or friend in exchange for an IOU, then the payday loan can be avoided.

Payday loans are useful for borrowers who do not have any savings or collateral to offer in exchange for a traditional personal loan. Since no credit check occurs, they are also handy methods for people with bad credit histories to obtain instant cash.

Applying for a Payday Loan

The application process to obtain payday loans is simple. It does not include a credit check, and can take just a few moments. The prospective borrower must be able to provide a few specific pieces of information, including full name, home address, Social Security number (SSN), a valid checking account, and employment information. Typically, the prospective borrower needs to provide information on his place of employment, the length of time that he has worked there, and his monthly salary.

Most payday lenders require potential borrowers to have worked at their current place of employment for at least 6 months with a minimum monthly salary of approximately $1,000. Obviously, payday lenders do not provide a greater sum of money than the individual can repay with his next paycheck. However, individuals without steady employment pose a greater risk for the lender in regard to having the debt repaid.

Once the payday loan is approved, the borrower provides a check for the amount of money he needs to borrow combined with the amount of the lender’s fee. Then he receives the amount of the check minus the service fee. The lender might electronically deposit the borrowed amount directly into the checking account of the borrower if he prefers. The lender must agree to hold the check until the borrower’s next payday, which is when the loan is due.

When you apply for payday loans online, all of the transactions are typically made electronically. This means that the money you receive is sent via direct deposit into your bank account, although it can also be sent via postal mail if you prefer. If you apply in person, you can also choose to have the funds deposited electronically into your bank account rather than accepting cash.

As an example, let’s say that you need to borrow $400 for car repairs, you don’t have the cash available, and you only receive your paycheck every two weeks. You find a lender offering payday loans for a service fee of $20 per each $100 of borrowed funds. You obtain the payday loan of $400 for a convenience fee of $80. This brings the total amount that you need to repay to $480.

The loan is secured by either a personal check or the information needed to make an electronic transfer. You either give the lender a postdated check for the full amount of the debt or you provide your banking information. The payday lender gives you the sum of money minus the fee, in this case, $400.

Payday Loans Rates & Fees

Lenders charge according to a pre-determined fee scale that fluctuates depending on the amount of the payday loan. Unlike traditional bank loans, the fees are translated as a single figure rather than as an interest rate. This is primarily due to the short length of time that the debt is in effect. However, if you wanted to calculate the annual percentage rate that the fee would break down to, you might be surprised to discover that it is exorbitantly high, reaching as much as 2,000 %.

The service fees for payday loans are based upon the actual amount of the money that is borrowed. Typically, the fees charged range between $15 and $30 per each $100 that is borrowed. For example, if someone borrows $1,000 and the lender charges $20 per $100, then the borrower now owes $1,000 + $200 = $1,200. The borrower must provide a postdated check for $1,200 to the lender if applying in person. He then receives $1,000. When the loan is due and payable on the borrower’s next payday, the lender cashes the check.

If the borrower is applying online, he provides the necessary banking information (bank, routing number, account number, and check number) to the lender so that he can withdraw the funds electronically using this information when the payday loan becomes due.

Some lenders may choose to charge a percentage of the borrowed sum as the fee rather than incremental amounts. For example, the lender may automatically charge a flat 20% of the full amount of the borrowed sum of money no matter how much it is.

Even though the service fee may not be labeled as the APR (annual percentage rate) for the loan, the lender is required by federal law (the Truth in Lending Act) to disclose this amount to the borrower at the time of the transaction. This information must be offered in writing to the borrower. It should include the APR as a percentage rate along with the exact dollar amount that the lender is going to charge for the transaction to go through.

This service fee is going to vary depending on the exact amount of money that is borrowed and the length of time that the loan is in effect. Some individuals are paid weekly, and so their loans are in effect for one week (the next time they receive a paycheck). Other individuals may only receive a paycheck every two weeks or once a month, so the length of time their loan is in effect is longer. Each lender chooses the service fees that he charges for each of his payday loans.

As an example, let’s say that you borrow $400 at $20 per each $100 of borrowed funds. Since your paycheck is due in two weeks, your payday loan is in effect for two weeks. The total service fee is $80. The APR is calculated based upon the following information: $400 borrowed for 7 days with an $80 fee. Your APR is 1042.8571 %. Your payday lender must provide this information to you in writing. As you can see, borrowing money through payday loans delivers costlier APRs than those attached with conventional loans, offering single digit APRs.

How Much Should You Ask For?

When deciding how much money you should ask for as you apply for your payday loan, it is important to ask yourself two questions:

• Who much do I actually need?
• Will I be able to pay back this debt in full by my next paycheck?

Since the service fee is typically charged on each $100 that you borrow, it is important not to borrow more than you actually need. If you borrow a larger sum of cash than you need, you are paying for that privilege. The best option here is to only borrow the amount that is needed to get you out of your present financial difficulty.

If you can manage with a smaller sum of money, it is in your best interests to do so. Not only will you end up paying less in service fees, but it will also be easier to pay off the debt when the note is due and payable.

It is also important not to borrow more money than you can pay back by the time you receive your next paycheck. If you can’t pay it back, then you are going to need to rollover the debt, and new fees are going to occur. Each time you rollover a payday loan, the same fee is charged anew. Using the existing example, if you rollover your $400 payday loan because you cannot afford to pay it off, then you are charged another $80.

Therefore, the fees for this particular payday loan are $80 + $80 = $160. As you can see, it becomes quite expensive to rollover a payday loan, lending merit to the idea of only borrowing what you can afford to pay off at the first due date.

A Few Tips on Payday Loans

Perhaps the most important advice concerning payday loans is that you should shop around in order to obtain the most reasonable fees.

You should always assess your actual need for the money before taking out a payday loan. Can you really not wait until your next paycheck?

You should never take out a payday loan if you cannot repay the debt in full with your next pay period. Failing to repay your debt can lead to even greater debt, placing you at a greater risk of not being able to pay your immediate cost of living, including rent and groceries.

Obtaining money through payday loans can lead to habitual borrowing and debt that increases instead of diminishing in size.

If you have a serious debt problem and you realize that payday loans aren’t actually going to solve your financial difficulties, make arrangements to speak with a debt counselor.

What Happens if You Fail to Pay Off a Payday Loan?

If for some reason you cannot repay your payday loan, you can roll it over. This means that the due date for repayment is extended. Of course, an additional fee is added to your first payday loan, increasing the cost to you.

The number of times that you can rollover varies, depending on the lender. Each time, however, an additional fee is added to the balance that you owe. In some cases, the amount of the fee to rollover your debt increases incrementally, meaning that each new fee is higher than the one before it. Borrowers can end up paying a service fee for their initial payday loan several times a year if they continually roll it over due to the inability to pay it off in full.

If you choose not to rollover your debt, the lender can attempt to cash your post-dated check. When the check bounces, fees are charged by your bank due to insufficient funds to cover the amount of the check. Since you have written a bad check, legal action against you is possible.

Paying a Payday Loan Back

The check that the borrower writes includes the borrowed sum of money as well as the service fee that the lender charges for the transaction. Once the due date arrives, the lender either cashes or deposits your post-dated check. If the payday loan was arranged online, the lender withdraws the funds from your bank account electronically.

Online Payday Loan Lenders & Their Service Review

Loan Providers was chosen as they have clear Rates & Terms section on their website, and respect local laws.

Both lenders offer fast cash by tomorrow with online appellation, no-fax required, instant approval

CashNetUsa - Payday Loans Online and instant fast cash advance. Apply in 5 minutes, get cash the next business day! Quick approval, no fax required. Payday Loans up to $700. Details vary by state. (Check website Loan Cost and Terms)

Also available - Installment loans & Lines of Credit.

Services in the following states -

Alabama, Alaska, California, Delaware, Florida, Hawaii, Idaho,
Illinois, Kansas, Louisiana, Maine, Maryland, Michigan, Minnesota, Mississippi, Missouri,Nevada,New Mexico,North Dakota, Ohio, Oklahoma, Oregon, Rhode Island, South Carolina, South Dakota, Tennessee, Texas Utah,Virginia, Washington, Wisconsin, Wyoming.

Coupon: Save 50% on initial loan fee or simple interest.

Promo code: NEWCASH50

Did You Borrow Money From CashNetUsa? Please Comment Bellow The Post With Your Experience.

PayDayOne - Fax-free loan, low credit score OK. Borrow $100-$1000. depending on the laws of your state. eligible for an increase to your loan amount depending on your payment history. Details vary by state. (Check website Loan Cost and Terms)

Services in the following states (mark in blue)

Did You Borrow Money From PayDayOne? Please Comment Bellow The Post With Your Experience.

ZestCash - ZestCash provides fair and transparent short term loan solutions featuring custom loan payment options, designed to meet the financial needs of people who do not have access to traditional credit. Fast cash with personal service and rates up to half the cost of payday loans.

Borrow up to $800

Apply online – No paperwork or faxes. Just complete a short online questionnaire. Money in 24 Hrs

Main differences from payday loans : Small payments over time, as most payday lenders you pay full all-at-once.

Services in the following states - Utah, Idaho, Missouri and South Dakota

Did You Borrow Money From ZestCash? Please Comment Bellow The Post With Your Experience.

Editor thought on choosing a payday loan lender - 

PaydayOne or CashNetUsa both offer more or less the same service, check the amount of money you can borrow from each, and any additional fees and compare your options. You can do it before applying to any of them by simply visiting their websites. ZestCash is not a payday loan provider, it is more a long-term small personal loans, however it’s interest is not at is best and if you credit is average/good consider a long-term loan from your local bank/or visit our post ”How to Get a Fast Small Loan of $5000 Overnight”

 More Info on Our Site

How to Get a Fast Small Loan of $5000 Overnight (Alternative for payday loan for people with good credit)
For Who Payday Loans Made For  (not yet published)
Payday Loans – Questions to Ask Yourself  Before Applying for a Payday Loan
Alternative Options For a Payday Loan  (not yet published)
Paydays Loans – Understanding the Rates  (not yet published)
The 101 of Payday Loans  (not yet published)
When You Should Never Take A Payday Loan & When You Should Take A Payday Loan

Sites with Payday Loans Information

Popularity: 54%

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