What is a Payday loan and how does it work?
April 30, 2020
What are Payday Rocks loans and how do they work? Basically, a payday loan, as the name suggests, is an amount of money you are going to borrow and is meant to be paid back the moment you receive your paycheck, hence the name. It’s typically high-cost and must be repaid much sooner compared to other loan types. The only requirement payday loans need is your bank account showing that you are receiving a steady income. Individuals who have a bad credit can benefit from payday loans.
Despite the convenience of payday loans, financial experts highly suggest you be extra careful when applying for these loans. Make sure you are able to pay what you owe on or before the due date otherwise you’re better off applying for other loan types. Payday loans are not the same for every state and they go by different names like deferred presentment, deferred deposit, cash advance and many more.
How Does It Work?
In this type of loan, a payday lender will validate your income by assessing your account information. Once that has been confirmed, your money will be delivered either in cash in as fast as 15 minutes or it can be transferred to your account electronically. Your lender will request for a signed check or ask for a written consent to electronically transfer money from your bank to theirs. The due date will be on the next day following your payday. If you fail to pay the lender back, the lender will run your check or withdraw the amount you borrowed from your bank account in addition to the interest. An electronic withdrawal will be made.
Payday loans go through a lender and the lender makes all the important decisions but it can also go through a broker regardless if it’s a direct lender or a broker, not paying your dues on time will result to additional costs.
How Much Money Can You Borrow From A Payday Loan?
One of the first things borrowers want to know is how much money they can borrow from a payday loan. Well, the answer will depend on what state you belong to. The amount you can borrow will vary depending on your state laws as well as the finances of your designated state. However, you can borrow between $300 u to $1000. However, just because you qualify for a payday loan doesn’t mean you can request for just any amount. The lender will still check your income, your expenses as well as your lending history before they can approve your request. Based on these pieces of information they will determine a reasonable amount that they know you can pay back.
What Are The Requirements When Applying For A Payday Loan?
Basically, all you need when applying for a payday loan is an identification card, an active bank account as well as a printed proof of income. It’s also important that you are 18 years old and above. However, even if all your requirements are complete there is still a possibility that you may get rejected if you do not have sufficient funds in your bank account, if your net income does not reach at least $500 every month and if you already have an existing loan. Your lender may also reject your application if you have not been employed long enough, if you are an active-duty military and if you had just opened a bank account.
Payday loans offer convenient and fast financial assistance to individuals who need money ASAP. However, before you get all excited it is important that you understand the mechanics and the terms of this type of financial loan and make sure you qualify before you send your application.