Payday loans are meant to make you out from difficult situations urgently and help to tackle current problems. For using it, prior knowledge about possibilities is essential.
These loans are tiny ones which you can take anytime in some urgent situation like when you don’t have enough money to pay your bills or for health issues or to buy something. Loan amount is already set to $100-$1000 in some states, but it also varies to your state law.
what is payday loan
Payday loans are known as single repay loans as the amount can be paid into one instalment only before or on the due date which is always mentioned on agreement of loan. These loans are usually refunded in few weeks.
You can expand your loan for the surge of due date, nevertheless fees will be piled-up. There are few states who have set up a fixed limit to renew your short-term loans. So, it would be beneficial for you to look out proper rules built by your state government.
Because it doesn’t bother about your credit history at all and provide uncomplicated acceptance. Hence, netizens who are in trouble due to money related problems, like to take this loan.
Payday loans can be taken from storefronts, online or banks as well. First, you need to write a cheque for the same amount that you are taking for oneself with an additional fee and when you are set to repay the same then lender converts it into cash. In some other cases, to pay back the loan amount, you might have to sign on electronic access of your bank account.
Once you are ready to refund the amount, you can do it in several ways like to give permission to the lender to deposit cheque at bank or replace that cheque by giving cash.
This is the main thing to focus on while taking payday loan because many payday lenders impose unreasonable interest. Either rate of interest is usually fixed as per state law, some lenders find discrepancy in these laws. So, you need to keep your eyes open while taking loan.
You need to know how much APR (Annual percentage yield) you have to pay for the money you lend.
For instance, you applied for short-term loan of $250 for 10 days and $15 is your loan fee per week. As 10 days are more than 1 week so fees would be deducted for 2 weeks. Lender will charge around 1095% APR
Here is the formula by which you can calculate APR:
APR= (Loan fee/Loan amount)/ (Loan days/365) *10000)/100
Normally, payday loans are for urgent accountability for less than 30 days and amount goes from $100-$1500 nearly.
After so many court cases in 2008, now there is more transparency in this industry as compare to past.
Let’s have a look on payday advance loan of some cities of US:
In Austin city, for loan amount of $500 for 14 days lender charge around 533% of APR which includes finance charges of $102.27
In Chicago, IL, APR is around 409% for the same amount of loan ($500) with few finance charges i.e. $78.50
In Detroit, MI, its 342% of APR as the finance charges are around $65
Miami, FL has low amount of APR i.e. 286.78% for $500 of loan for 14 days with $55 charges.
Planning to take short-term loans? Here are some reasons why you should take:
Though, they can do other several things to take back their money like take help from court or hire a team to collect debt from you, in case, you can’t repay money.