A payday loan (also known as cash advance loan or salary loan) is a short-term loan of small amounts given to a borrower to meet an urgent financial requirement. The money lent is on the basis of the borrower having an income flow. The annual percentage rate attached to these payday loans are on the higher side.
The benefits of the payday loan are manifold. Even if you have bad credit, you can expect to have money in your bank easily, quickly and without any hassle. The terms of the loan including the fees and interest to be charged are clearly specified beforehand. The criteria for the borrower include being 18 years of age, having a valid bank account and being employed with proof of earnings.
In a traditional setup, the borrower goes to a payday lending store and applies for a cash loan with the obligation to pay in full by the next paycheck. He or she has to submit employment specific documents like pay stubs, bank statements and valid photo-identity cards as proof. The borrower also has to write a post-dated check and give it to the lender, after which the application is processed, and the borrower gets the money in his or her back account.
On the maturity date, the borrower has to go to the payday lending store and repay the money and fees in person. If the borrower is not able to do so, then the lender reserves the right to redeem the check. If the amount in the bank is not enough to cover the check, the borrower will not only have to pay the bounced check fee to the bank, he also has to pay additional costs like interest rates apart from the loan amount.
Online payday loans are quite popular, wherein the borrower has to fill the loan application online and attach scanned proofs as documents, after which the funds are transferred to her or his bank account. The repayment of the loan is done electronically, wherein the amount plus fees is automatically withdrawn from the bank account on the next payday.
Payday loans normally charge a dollar amount or percentage of every $100 borrowed. So the payday loan fees may range anywhere from $10 to $30 for every $100 borrowed; the amount depends on individual state laws in the US and the maximum permissive limits of amounts to be borrowed.
- Personal Details – This includes your name, contact details and authorized documents like passport, driver’s license or state ID
- Employment and Income related information – This includes employer-based information and earnings proof.
- Banking proof – Payday lenders require your bank statement for the past 90 days.
- Welfare payments – If you receive welfare payments, you have to furnish proof of the money you receive, and its regularity
Payday loans are a boon, when you need money on an urgent basis and do not want to be embarrassed by asking family and friends.