“It is that time of the month when my next salary is two or three weeks away and my house water supply have started to leak. I have the monthly bills to settle which will eat all the cash in hand. What do I do now to solve this house problem?”
Issues similar to this may be with a different nature can be seen in our homes and with people around us. Rising expenses are continuously burning hole in our pockets and a decent increment in our salary in the current times can be considered as a good joke. The cash crunch impacts most of the middle or lower income households in one way or another, leaving a lot of us in desperate and unimaginable situations.
Payday loan here appears as one of the most appropriate alternative in such circumstances. The online payday loan helps people with immediate money in hand during the middle of the month when the salary is some time away. The basic grounds in the favor of taking this loan at this point of time is the time factor. It hardly takes any time to get money through this loan, and going ahead with the expenditure. Once the salary is received, the loan is paid off making it as a hassle free option. Quick to borrow and quick to close is the guiding principle for this product.
Payday loans appear as one of the most appropriate alternative
The request for borrowing the loan is generally made through the online channel or visiting the store. Online mode being the most convenient and quick is more popular now. A simple online application form with basic demographic details is required to be entered by the applicant. Once this information is submitted by the applicant, the lender evaluates this request for loan. Payday lender essentially looks for the applicant to be
- A legal resident of the United States with a valid residential proof
- Legally employed with a minimum of 90 days working under the same employer
- Presence of an active bank account. This account is used for the loan amount to be transferred and later recovered from by the lender.
- Inflow of regular and fixed salary on a periodic basis. This point is the backbone of the loan approval since the repayment capacity is derived from it.
- A minimum age of 18 years or above so to enter in a contractual relationship
Each such application also runs through a credit check which is supplied by the various credit rating agencies like Equifax, Transunion etc. The credit check provides information if the person has not been declared a bankrupt. The report also provides information if the customer has been defaulting with any other institution or not. An already defaulting customer are generally not entertained by the lender.
Repayment for online payday loan is to be done by the next pay cycle. The applicant either issues a check dating it to the next paycheck day, or issues debit mandate authorizing the lender to withdraw the money automatically through an ACH (Automated clearing house) transaction.
There can be a situation wherein the borrower might have difficulties in paying off the online loan as per the agreed date. In such a scenario, it is highly recommended that the borrower should contact the lender and work out a workable solution to the situation. The lender can reschedule the loan as per the convenience of the borrower. Other options like rolling over of the loan amount, converting the single payment into periodic installment based payments, or including a holiday period etc. All such options between the lender and the borrower attract additional charges, penalty interest rates and fees. The lender can also report the performance of the borrower on the loan with the credit rating agencies. The agencies will update the record of the lender with the performance which will come alive when the borrower is applying for another loan elsewhere.
Online payday loans suffer from multiple criticism like charging exorbitant fee or rate of interest and taking advantage of their position through coercion or other forced means. Other accusations like taking advantage of the position are also not unheard of. The government has been trying their best and introduced various regulations to minimize such issues. But the loans serve well to the people who are in dire need of funds.
Thus the onus lies on the individual who is looking for money to carefully evaluate his financial position and the repayment capability before opting for any type of credit for a better financial management.