Payday Loans
Payday loans are a very short-term loan given until the person's next payday (usually for amounts below $1,500), although some can be given for 15 to 30 days. Also known as payday cash advances, cash advance loans, check advance loans, post-dated check loans and deferred deposit check loans they are all about one thing: obtaining an instant cash advance loan.The sort of people who use these type of loans usually have explored all other options and are desperate for cash. Most payday loan places don't do credit checks - so those with bad credit can get this type of loan with ease.
Once you fill out an application and give the lender things like photo ID and a pay cheque stub, you sign a loan agreement and make a postdated cheque for the total number you're required to pay, which includes the loan plus the fee payments. Then, you get your money. The postdated check is held onto until the loan payment due date, which is typically two weeks afterward. Your cheque is then deposited by the lender, apart from when you've replaced the cheque or already paid back the payday loan.
The common requirements to get a payday loan are minimal and generally involve:
- That you are currently employed or have a regular revenue stream.
- You have got to be of legal age - usually 18 years of age.
- You have a current bank account that has been in existence for at least three months.
- Your account indicates a monthly deposit of at least $1,000 from your payroll, or $800 for those on a fixed income.
- You shouldn’t have any outstanding payday loans.
- Photo ID, like a driver's license or any other kind of government-issued ID.
- A recent copy of a bank statement, usually no more than 30 days old.
- A personal check marked "VOID".
- A copy of your most current pay stub.
These types of loans, though easy to attain, can be quite expensive. Payday loan organizations give the borrower the amount of the check minus their portion (They get their money up front). Fees (sometimes also known as finance charges) are usually close to 20% of your cash advance amount thus for a $500 loan the fee is $100, for a $800 loan the fees $160 and so on, the annual percentage rate for these loans can vary from 150% to 1000%.
The vital thing to consider is your capacity to pay back the loan, since if you're low on cash this pay period, consider whether you will be short of money next pay period. Remember that you are required to use your next pay cheque to repay your loan. Some people discover that after they start with one payday loan, they end up having to borrow money in their next pay period to pay it back and go on to repeat the borrowing cycle over and over.
These loans are just like any other type of debt, but they are judged to be high-risk loans. If a person discovers that they are not able to pay back the loan, the payday company can ask for compensation for the face value of the cheque, court costs and late charges, along with NSF fees. Once a judgment is obtained, the lender may resort to making use of a collection agency or attempt to garnish your wages.
Many payday loan lenders also list past due accounts with the credit bureau and this may harm your ability to acquire credit in the coming years.