Payday advance loans to meet your short-term financial needs
For many people, payday loans come as a relief when trapped in a situation that requires immediate financing. Lenders are also available both online and in-store, making the loans easily accessible. But even before starting out with your loan request process, it is important to get more information about payday loans and whether it is the best option for you.
Payday loans are issued in small amounts with the main purpose of helping the borrower in short-term financing. Most lenders require borrowers to pay the loan on their next payday. Individuals use payday loans when they are short of money to cater for monthly bills or in case of emergency situations that require urgent funding. Payday advance loans are issued from $50 to $500, although there are other lenders who can offer loans up to $1000. Borrowers do not need to have good credit history to apply for the loan, making them more attractive. However, payday loans are not meant to offer long-term financial solutions to the borrower. If you fail to pay the loan on time, you can risk high paying high-interest rates. As much good credit as not a requirement for borrowers to qualify for the loan, you still need to go through the application. Depending on your preference, you can apply for the loan either online or in-store.
Who is eligible for payday loans?
Credit score does not have an impact on payday lending. However, there are several other qualifications that individuals have to meet for them to qualify for the loan. First, the borrower should be a citizen of the state where the loans are offered. Some state laws prohibit issuance of payday loans, while other states’ departments of business oversight have a number of restrictions regarding the loans. There are lenders who are willing to provide such information to their clients, but it is also important that borrowers do their own research to avoid being scammed.
After you are sure that payday advance loans are legal in your state, the first requirement is to provide proof of income. You actually don’t have to be on permanent employment for the loan to be approved. Alimony, government benefits and other regular income sources are enough for a borrower to qualify for the loan. You also need to submit copies of your bank statements, pay stubs or letter from the government to confirm that you are a beneficiary of a regular income source. Generally, borrowers will not be able to access payday cash advance unless they meet all these requirements. Other requirements include:
- You must be of legal age
- You must have a bank account with bank history of at least 30 days
- National ID card
- You should not be on active military duty
- You must have verifiable references
To determine the amount you can comfortably repay per monthly, your budget and total next payday amount should be considered. Borrowers are also allowed to renew the loan, but you also should ensure that some money is paid towards the principal at all times. Even a minimal amount will help reduce your interest and outstanding balance eventually reducing your payments. If you frequently borrow without reducing your principal amount, you will end up paying large amounts in the long run.
Payday loan repayment
After the loan request form is approved, the lender has to be issued with a check for the total amount lent to the borrower, which is cashed when the loan is due (usually on the borrowers next payday). Alternatively, you can issue the lender with bank account details to enable direct deposit for the loan and also for the lender to withdraw funds when the loan is due. If the borrower is not in a position to repay the loan in full, the remaining amount will be rolled over to create a new loan. This means that the borrower will now pay the original fee and a new fee incurred for the rolled over loan. It is therefore important for the borrower to communicate any changes in the loan terms as soon as possible to avoid such penalties.
Advantages of payday loans
Payday advance loans can come in handy when you need short terms financing for both individual and business needs. When the loan is correctly used, it will yield the desired results and there is no doubt that your experience with the loan will be positive. Here are some of the benefits of requesting for payday loans:
The last resort when there is no other option
If you find yourself in urgent need of money, applying for a loan in financial institutions can take days, or even months for you to access the funds. If you have poor credit record, chances are that you will not qualify for a loan. In this case, payday loans can be of great aid.
Easy to obtain
There are a number of payday lenders who offer payday loans, both online and in-store. Online payday loans reduce that hassle of going through all the paperwork involved in traditional loans. You also have the option to choose the lender with the lowest interest rates and convenient terms and conditions.
Fast and convenient
After your loan request is approved, it only takes a 2-3 business days for your bank account to be credited. Some lenders can even approve the loan within 24 hours after loan request.
Protects your credit rating
Payday loans need to be repaid within a short period of time. As much as this may seem to be a shortcoming, it is actually an advantage to the borrower. In installment loans, borrowers can pay the loan for years, and anything can happen within this time period. For instance, the borrower can lose their job, or fall sick before completion of the payment term. This means that you have to miss some installment payments, which will affect your credit score.
Individuals only have to meet a few requirements for them to qualify for the loan. The main requirement here is for borrowers to have a stable income source. As long as you have verifiable and consistent income, chances are that your loan request will be approved. This is contrary to traditional loans that require an asset as collateral, which will be repossessed by the lender if you fail to adhere to the loan terms. Having a stable income source is enough proof that you are able to repay the loan.
Borrowers can qualify for higher amounts
New borrowers are limited to the amount of money that they should borrow. This restriction is normally within the borrower’s salary range. But when your first payday loan is repaid within the agreed upon time, lenders can increase the amount in your subsequent applications.
Disadvantages to payday loans
With all the benefits that come with payday loans, they may sound very attractive to borrowers. However, payday loans are subject to a number of controversies. It is therefore important that borrowers understand both the benefits and downsides of the loan to determine if it is the best option for them. Here are some of the drawbacks of payday loans.
Relatively expensive compared to traditional loans
Since payday loans are offered to cater for emergency situations, they tend to attract high-interest rates. Lenders also do not require any asset to be used as collateral, putting them in a high-risk situation. This, in turn, is compensated by increasing their rates. Failure to repay the loan on time will also incur more interest rates.
Borrowers can easily fall into a vicious cycle
Most lenders make extra money through borrowers who fail to pay their loan on time, leading to the amount being rolled over. This means that their repayment term will be extended, causing them to pay more.
At times, lenders may not disclose all information regarding payday loans to the borrower. They then end up taking advantage of borrowers since there will be no proof to defend themselves. It is therefore important that borrowers go through all the terms and conditions of the loan and ask questions before signing any documents.
Payday loans are beneficial for individuals who are caught up in tough financial situation that need instant funding. But as a borrower, it is important that you weigh the pros and cons to determine if the loan is the right option for you. You need to ensure that the interest rate and loan terms and conditions are clear to you before committing to the loan. The payday loan lender you approach should also be legalized. Payday loans will only be productive when effectively used. It is also prudent for borrowers to repay the loan on time to avoid increased rate penalties.
My Name is Jay has and I have a passion for financial writing. I am the chief writer on this blog. I do my best to verify all the information but if there is anything amiss please let me know and I will do my best to correct it.