Little Timmy's birthday party is coming up. You've invited people, got the cake lined up, and your account is empty even though you still have decorations and a present to buy. You may even be in the position of not having enough food to last until next payday. It's still days until payday. What do you do??? One option is to get a payday loan.
This article covers basic things to know about payday loans. As there is a lot of competition for payday loans, the terms vary greatly from lender to lender. Thus, the information in this article is very general in regards to terms and requirements one will face when taking out a payday loan.
Also known as a cash advance, a payday loan is a means of obtaining cash quickly to help borrowers meet their cash needs until a near term payday, usually 1-3 paydays (1-6 weeks is typical). Payday loan companies, in most cases, do not require any type of credit, cash nor any collateral, except for earnings from a future payday.
In order to obtain a payday loan, borrowers must complete an application. The information required is limited to basic personal details, employment and banking information, personal references, the amount requested, a date for when the loan will be repaid, and a signature of the applicant.
When applying for a payday loan, you will often have to provide certain documents in order for you to qualify for the loan. These documents include the most recent paycheck, a government issued photo ID, a recent bill from a utility company, and sometimes a recent bank statement. Don't worry that you may not get a payday loan because you have bounced checks or a past due balance on your utility bill. They are simply trying to make sure you live in the same place and that your checking account is valid.
To secure the payday loan, you may be required to provide a check dated for the due date of the loan or you will be asked to provide bank account details so that they can process the payment electronically on the due date. The amount of the post-dated check will include the amount borrowed plus the interest and fees. In some states, the interest rate will be lower to comply with local laws, but there will be fairly large fees, since these are considered high-risk loans for the payday loan company.
There is often a contract to sign when taking out a payday loan, not unlike any other type of loan. It will spell out all of the terms and conditions of the loan. There will also be a truth-in-lending statement to sign for the payday loan which will spell out the principal (the loaned amount), any interest charged, finance fees and charges, what the late fees will be, what the interest rate is on an annual basis (the APR), and the date any payments would be required.
After completing all the paperwork, it is entered into the computer where it is evaluated and approved. Keep in mind, the approval process for a payday loan is fairly easy, because the interest and fees for each loan is roughly 15-20% of the amount loaned and the payday loan company only has their money tied up for a few days or a couple months. When approved, you get the cash on the spot. Although, in some instances, the payday loan may be in the form of a check. It's a good idea to ask before applying for the payday loan, if a check will be unacceptable for you. If applying online, the loan proceeds will be deposited into your account within 1-2 business days. So be sure you keep holidays and weekends in mind. If you apply on a Friday, you may not have access to the funds until Tuesday or Wednesday.
The bottom line is this... If you need cash fast and you can afford to pay back the payday loan with the interest and fees within a few paydays, then it may make sense for you. The process is easy and fast, so don't be afraid of being turned down. Chances are you will qualify for anywhere from $200 to $1500. This can make all the difference when you need cash and need the cash quickly.
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