Helping Make Ends Meet with a Payday Loan
Today's credit crunch has left millions of consumers without a means to acquire short-term loans to meet their short-term financial needs.
Fortunately, there is a possible solution to help well-meaning consumers who are in need of just a little financial assistance: payday loans.
Understanding Payday Loans
Many people might have heard about payday loans in the news recently, but they might not fully understand how payday loans actually work.
Payday loans are intended to serve as short-term loans that are repaid by the borrower's next payday - generally, within 14 to 31 days.
Typically approved within a matter of minutes and not requiring tons of paperwork, payday loans offer the benefits of speed and convenience. Additionally, most payday lenders do not require a credit check prior to approving a payday loan so a consumer who might be shutout from standard loans due to a poor credit score can still acquire a payday loan.
Applying for a Payday Loan
As noted above, the process of applying for a payday loan is very simple.
Payday loan customers can apply for a payday loan at one of the many payday loan lenders located in their area. To obtain the payday loan at one of these locations, all the borrower needs to do is provide a personal check made out for the borrowed amount plus any finance charges.
Those wanting to obtain a payday loan also are able to apply for a payday loan online. In this case, the borrower only needs to provide his or her bank account information and the payday lender will deposit the loan directly into the borrower's account.
Qualifying for a payday loan also is simple. There are only a few requirements that borrowers need to meet in order to qualify for a payday loan. As a borrower, you must:
- Receive a regular income via employment or a government program, such as social security or welfare.
- Earn at least $1,000 per month if you are employed or receive at least $800 per month if you receive income from a government program.
- Be at least 18 years old.
- Be able to prove American citizenship.
- Have an active savings or checking account with a direct deposit option.
Repaying a Payday Loan
Many types of loans come with an extended repayment period consisting of a series of payments. A payday loan, however, is intended to be paid in full at the end of the repayment period.
The payday loan borrower is expected to repay the payday loan in full by the due date. If the borrower is unable to repay the loan, he or she can extend the loan, but at a cost.
Many consumers might have heard about the high interest rates associated with payday loans. These interest rates often start at around 400 percent, but can increase significantly if a payday loan is extended.
When a payday loan is extended, the borrower must pay a financing fee. This fee is tacked on to the original loan and thereby increases the interest rate of the payday loan even further.
If the borrower is not careful, the financing fees can start to add up quickly, which is why the borrower should do everything possible to ensure that he or she is able to repay the payday loan by the original due date. Extending payday loans is what gets borrowers into the financial trouble that has been associated with payday loans.