What Are Payday Loans?
Many people find that at some point in between paychecks, they are in need of some extra cash. Payday loans are designed to be short-term loans that are available when you need extra cash, but do not have a paycheck coming in until a later time. Your income is used as the primary factor when determining the amount that you may be approved to borrow. Many people will use a payday loan for unexpected auto repairs as well as unexpected traveling necessities.
Payday loans are great for people that do not have any other means of getting money and are in need of quick cash. However, the negative side of a payday loan is that they usually have a very high interest rate. The interest rate for a two week loan is usually 15-30%, which translates to an Annual Percentage Rate (APR) of 390-780% interest. Generally, the amount borrowed plus the finance charge will be due within a two week period. There are thirteen states that have now banned payday loans, due to the controversy of the higher interest rates.
If you live in a state that has not banned payday loans, and are looking to get one, you will need to bring a few things with you to apply. Most companies will require that you bring a photo ID, a personal check, a current pay stub, and possibly a current bank statement. When you secure your small loan, it will usually be due on your next payday. You will write a post-dated check to the company and either come back on that date to renew your loan or allow them to cash your check. If you allow the company to cash your check and you do not have the money in your account, you will be required to pay the fees for an overdraft check.
There are also payday loan companies online that allow you to obtain a loan without having to go to a physical store. These companies may require more documentation than an actual store because they will need to verify your identity before providing the funds. Be sure to fully research any company that asks for your personal information because there are many lenders that are not legitimate and use this as a way to steal your identity.
Obtaining a payday loan has helped many people when they are in a crisis and need to have the money. They will likely help many more people in their lives as well. The main thing to keep in mind when applying for a payday loan is the cost. Like any other loan, they will cost you the interest charges. Always make sure to note when the payment is due and whether you will be renewing the loan or paying it off in full to avoid any overdraft fees from your bank and the payday loan company. If used properly, payday loans can be a great thing. Having a payday loan and paying it off can also positively affect your credit as they do report to all three of the major credit bureaus.