Payday loans are short term loans where the repayment is linked to the payday of the borrower. Lender holds the check until the next payday of the borrower and does not wait for the whole year to get the payment. Borrowers would write a check for the amount borrowed plus the additional finance charge and lender can receive it as cash. Payday loan can also be rolled over to the next pay period in case the borrower is unable to pay the full amount by just paying the finance charge of the previous pay period. Some also call payday loan as cash advance, deferred deposit or credit access business.
Interest rates in Payday loan could vary from $10 to $30 for every $ 100 borrowed. On an average payday loan is calculated to be $350 and to be repaid in two weeks. You need to be 18 year old with a back account. An ID proof as well as pay proof is required.
Low payday loan rates usually charge for the days you have borrowed the money so it helps save money. Lenders do not conduct any credit check nor do they report the on time payment or defaulters to the credit bureaus.
It is the ability of the lender to collect the money back from the borrower so at times payday loans could be a debt trap.
Depending on state regulations, there are payday loan stores and other stores where other financial services, like check cashing and title loans which sell pay day loans. Loans are also provided over Internet and mobile devices.
Cash advances in the form of payday loan could be a resolution for emergencies including car repairs or a hospital bill. Long term credit requirement should be availed through a different approach possibly a personal loan or a credit card and the rates are also affordable.