What is a Payday Loan and how does it work?03/30/2019
What is a Payday Loan?
So you're a little strap for cash and looking to apply for a payday loan, which also means that you probably have a few questions such as what is needed and or the application process of it all. You've started on the right path, going online to find out the inner workings of a payday loan is crucial in not only protecting yourself from scams but making sure that you are getting the best possible outcome. So, what exactly are payday loans? They are essentially a short-term loan that can help you make it to the end of the month or until you receive your next paycheck. Unlike a bank loan, payday loans are a faster and more convenient way to get quick cash in your pockets. The following will include information that you may need when choosing the right company to apply with, rates, applications process, and other components of a payday loan.
How does it Work?
Payday loans are easy to understand and therefore an excellent option for those seeking to receive short-term financial assistance. Depending on where you live they may go by different names such as Cash advance loans, payday loans or Check Advances; however, they all usually mean the same thing. So, what is needed to qualify for a payday loan? You will need to request the amount needed and how you wish to receive that amount from the lender. The lender will then typically provide you with that amount depending on the state you live in as they all vary in the amount they are legally allowed to provide to consumers. All or a portion of the loan is then required to be paid at the day of your next paycheck.
Payday Loan Rates
Due to the fact that payday loans are usually small amounts with short repayment periods, the vast majority of these loans will not have a low rate of interest, so if a low rate is what you're looking for, you won't find it here. So, how do payday lenders determine the interest rate on your loan? More often than not they will base it off on the amount you are taking out at the time. According to the Consumer Federation of America, a typical payday loan APR comes out to roughly 400%. This, of course, will have consumers pay more than the average personal loan. However, it is an excellent alternative to those with low credit scores.
How To Get a Payday Loan
As stated, a payday loan is very different from a personal loan that you may acquire from a bank. Depending on your state and or city laws, a payday loan can be obtained via an online application or from a physical payday lender branch. Although some states have made the practice illegal, the majority still allow it. Once you are aware of your local laws regarding payday lenders, the next thing to do is send and get an approved application. The payday lender will then deposit your loan via bank account or cash if you prefer that route.