You Need to Know About Payday Loans

Many of us sometimes find ourselves with some unexpected expenses like a heavy medical bill or car repair bill when we are in the middle of a cash crunch. At times like these, while some people do have the option of paying through their credit cards or borrowing from a friend, many people do not have even this option because they do not want to borrow from friends and have already maxed out their credit cards for the month. Payday loans come as a boon for people in such situations!

What is A Payday Loan?

The pay day loan or a cash advance loan is a short term, low amount, instant loan that can be transferred to your account on the same day. These loans are given at quite a high rate of interest and have to be paid back by the next pay day. Payday loans can be availed by anybody who needs a loan ranging from a hundred to a couple of thousand dollars and is gainfully employed.

How Do You Get A Payday Loan?

There are more than ten thousand outlets in the US that advance pay day loans. Getting a payday loan is extremely easy and convenient, and one can even apply on line or on the phone. You will need to supply your payday loan provider with your name, address, bank details and proof of employment, and your payday loan will be electronically transferred to your account within 24 hours. Nowadays, a number of companies transfer payday loans within the hour, and many advance payday loans to people with bad credit. Most companies will ask you to deposit a post dated check for the total amount of the loan principal and fees which the company will cash in on your next pay day. Some companies will withdraw the funds from your salary account directly.

While payday loans prove to be quite helpful during times of dire financial needs, a payday loan comes with a number of catches, due to which these types of loans are quite controversial. Taking a payday loan as a last option in times of need is okay, but make sure that you know the advantages and disadvantages associated with this kind of credit.

Advantages of Payday Loans:

A payday loan is the fastest and most easily available loan in today's time.

This type of loan can be availed online, over the phone or in person.

Most companies do not even do credit checks. All you need to get this type of loan is a proof of employment or last month's pay slip, apart from giving your bank account information.

You get the loan proceeds within a maximum of twenty four hours. With the competition in the market increasing, many companies will now transfer the funds within a couple of hours.

These loans are secure and chances of scams and cheating are as low as in any other normal credit process.

Disadvantages of Payday Loans:

Payday loans are extremely costly. Lenders charge a fee ranging from $15-$25 for every hundred dollars lent over a period of 14 days. So if you borrow $1000, you end up paying $250 as fee for borrowing the money for just half a month.

Payday loans get even costlier when extended. Payday loans can be extended in case you are unable to make your payment on time. However, you have to understand that an extension of another 14 days will have you paying and amount that is more than half of the capital as interest only. In case you go for multiple extensions, chances of getting into a very bad debt trap are there.

You get only small amounts as payday loans. The maximum limit is set by state governments and in most states; it is up to $400-500 only. Some states do allow you to take out loans of up to a thousand dollars.