Payday loan? What it is?
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.
Instant Advance Pay later:
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.
What if you can’t refund Payday loan on due date?
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.
Why it is well liked by people?
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.
How you can proceed towards 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.
Interest on payday loan
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:
- Effortless application: There is no hard rule to complete the process of applying for payday loans. It just needs a bit of information of yours while filling the form including id proof and bank statement. They do not check your credit details as other loans do.
- Speedy: These loans do not take much time to approve if your details are correct and relevant. It takes around 2 hours or less to transfer the amount in your bank account. The online procedure of this application is also very convenient and fast through which you can get cash in a click. It is speedy because it does not require deep verifications as compare to other loans.
- Easy approval: As opposed to other loans, these paycheck advance loans do not secure any of your belongings like property. So, you can get very easy approval if you don’t have anything to keep as security.
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.
- Improved rules and regulations: Unlike earlier, now there is so much improvement in this industry as many reputed organisations are trading here. Fixed interest is also set (as per your state law) according to the amount you are borrowing so that you don’t need to refund double.
Even so, what you need to keep in mind?
- Costly: Its average interest rate is nearby 400% which is very high as compare to other loans. As if you are not able to refund the loan then you have to extend it again which will include more extra charges along with previous one.
- Access to your bank account: As, to borrow money you need to share your bank details with the lender. Lender will have a cheque that you’ll write before borrowing money to cash it after the due date but if there would be no money in your account at that time then you may face some costly overdraft charges along with bounced check fees.
- No help to build credit: These short-term loans do not assist you to create credit as they don’t link to credit bureaus.
- Tricky: It’s very tricky to handle as if you roll over a loan then there would be more extra charges which would be a great loss of money.