Enrich your Financial Knowledge

Nowadays we are getting pay day loan offers everywhere. From the local shopping mall to the internet, the payday lending industry is flourishing. But we should know what is pay day loan and is it as bad as most of the people say? Here you will get a complete idea about pay day loan.

What is a payday loan?

A Payday loan is a small loan (maximum $500-$1,000) for which you won’t have to show your credit report and you don’t need to have a good credit score. And for this type of loan no credit check is done. Payday loans are generally given for short period of days may be for 5-7 days and you have to pay the loan quickly. It helps you to cover your expenses until your next paycheck. This loan is also called as “check cashing”, “payroll advance” and “deferred deposit”. For emergency money it is a very good option for you. In the market you will be able to see many lenders who are not licensed, bonded or regulated by any important consumer laws.

Pay day loan are very costly. Borrowers should use them very cautiously and should repay them as soon as possible. For this type of loan you have to pay fixed dollar fee which includes finance charges to the borrower. Borrowers have to pay heavy rate of interest as this loan has very short period of time. For repaying the loan amount borrowers generally give a pre-dated cheque or debit authorization.

How does it work?

Say your car broke down and you need $ 400 to repair the car. So you have to apply for a payday loan through internet and when you will apply you have to write a post dated cheque for $450 payable to the lender (Including finance fees) and have to enter the information online. They will give you the money for certain period of time, generally 14 days. When the period is over you have to repay $450 (including finance charges) to the pay day lender. You can pay the money in cash or let them deposit the cheque into the bank. If you do not pay the loan amount within the time period then you have to pay some additional fees and finance charges. Then you have to write another cheque for the additional fees to the lender.

Who uses these types of loans?

Generally those people have steady income and a checking account can get this type of loan. It is commonly used by the borrowers who do not have access to credit cards or savings account. Since this type of loan does not require credit check so people with no credit or credit problems mostly go for this type of loan. Military personnel and recent immigrants are also included in the user’s list.

What are the benefits?

Pay day loan is a very good option for the people who need emergency cash, like for car repair, to pay the medical bill or some other one time expenses when they have no other borrowing options available. This is a good option for the people who do not have any credit card or any balance in the savings account. As this type of loan does not require credit check so people with credit problems can get pay loan.