Expenses may come as surprises whenever financial emergencies suddenly appear from nowhere. There are things that we cannot predict and no matter how prepared we are financial emergencies will surely drain our pockets.
Good thing there are quick financial solutions such as payday loans. A payday loan can offer the quickest and easiest funding any time you encounter a financial crisis.
What is a payday loan?
Payday loans are one of the easiest short-term loans to take. It is an unsecured loan which does not require any collateral. The loanable amount is within a $500 or less range with typical repayment term of within 2 weeks or the next payday. In payday loans, the amount borrowed is paid in full on the due date.
How does a payday loan work?
Payday loans are usually offered by lenders whether online or with a brick-and-mortar office. Lenders are regulated by federal and state laws. However, certain states have limitations on fees and interest rates while in some states it is totally banned.
Some payday loan lenders will require credit checking but most lenders will not run a credit check which makes this type of loan appealing to people with bad credit.
Repayment for a payday loan
Repayment can be made in different manners. In certain cases, the lender will request for a postdated check that will be deposited on the next payday. Another way is the borrower gives the lender authority to take the payment from the borrower’s bank account.
Credit score is not a factor for payday loans since the lending company has full authority to directly take payment from the bank who issues the paycheck. This is one way that lenders are minimizing the risk. The paycheck will also be the basis of how much money a borrower can loan.
Payday loan fees and other costs
The way that payday lenders charge interest on their loans is non-traditional. Fees are calculated according to the amount borrowed and then added to the total balance for repayment. Different lenders have varying costs and fees so if you’re applying for a loan before your next payday, take time to shop first for the best offers.
It is very easy to get a payday loan and so much easier to pay than any other type or kind of loans available nowadays. But just like any other loan, this is a major financial obligation that we should not take for granted. Always make sure that you have enough money to pay back what you borrowed on or before the due date. If your lender would allow you to pay in full in just a week, you’d better grab it to make sure your budget in the next few weeks is hassle-free.
Spend the money you get from a pay day loan on something worthwhile. It may be small but if you use it for something that will generate income, that can cover whatever interest you need to pay and you might have additional earnings which can be used for saving. If you’re not going to use the money for business, just make sure you spend it on the most important needs in your life and not just for wants. A pay day loan is always a good idea if your purpose for borrowing the money is also good.