A payday loan (also called a payday advance, salary loan, payroll loan, small dollar loan, short term, or cash advance loan) is a small, short-term unsecured loan, "regardless of whether repayment of loans is linked to a borrower's payday." The loans are also sometimes referred to as "cash advances," though that term can also refer to cash provided against a prearranged line of credit such as a credit card. Payday advance loans rely on the consumer having previous payroll and employment records. Legislation regarding payday loans varies widely between different countries, and in federal systems, between different states or provinces.
To prevent usury (unreasonable and excessive rates of interest), some jurisdictions limit the annual percentage rate (APR) that any lender, including payday lenders, can charge. Some jurisdictions outlaw payday lending entirely, and some have very few restrictions on payday lenders.
Payday loans have been linked to higher default rates.
The basic loan process involves a lender providing a short-term unsecured loan to be repaid at the borrower's next payday. Typically, some verification of employment or income is involved (via pay stubs and bank statements), although according to one source, some payday lenders do not verify income or run credit checks. Individual companies and franchises have their own underwriting criteria.
In the traditional retail model, borrowers visit a payday lending store and secure a small cash loan, with payment due in full at the borrower's next paycheck. The borrower writes a postdated check to the lender in the full amount of the loan plus fees. On the maturity date, the borrower is expected to return to the store to repay the loan in person. If the borrower does not repay the loan in person, the lender may redeem the check. If the account is short on funds to cover the check, the borrower may now face a bounced check fee from their bank in addition to the costs of the loan, and the loan may incur additional fees or an increased interest rate (or both) as a result of the failure to pay.
In the more recent innovation of online payday loans, consumers complete the loan application online (or in some instances via fax, especially where documentation is required). The funds are then transferred by direct deposit to the borrower's account, and the loan repayment and/or the finance charge is electronically withdrawn on the borrower's next payday.
F.A.Q. about Pay-day-loan
What is a Payday Loan?
In the simplest possible terms, a payday loan is a short-term borrowing option. It is typically paid in a lump sum after a period of a few weeks, though installment plans are available. Payday loans are typically given out by private lenders, many of which are based entirely online.
How do I apply for a Payday Loan?
Applying for a quick payday loan is incredibly simple and not time-consuming at all. In fact, you can submit your application in under an hour. There will be a section on the lender’s website with a series of forms that you’ll be required to fill out in full. It is a very easy and straightforward process. You won’t have to deal with any stacks of paperwork that you’ll need to turn in. It can all be done within the comfort of your own home. This is just one of the reasons why so many people in the UK have fallen in love with these loans.
Are Payday Loan Interest Rates High?
You have probably heard that payday loans come with astronomically high-interest rates, but the fact is that they can actually be pretty reasonable. If you want to get the best possible deal on your loan rate, you will have to find the right lender. Take some time to compare quotes from various private lenders until you find a rate that works for your budget. The truth is that while these rates can be high, you don’t have to pay a ridiculous amount if you do the necessary research.
How Long Will I have to Pay Back my Loan?
The amount of time that you will have to pay back your payday loan depends on the amount of money you borrow as well as your lender. Larger amounts that exceed £2,000 are usually eligible for installment plans. This means that you will be able to pay back the money you borrow in a series of payments over weeks or even months. Smaller amounts are usually due within two weeks, so you can use your next paycheque to cover it.
How Much Can I Borrow with a Payday Loan?
One of the great things about payday loans is that you can borrow smaller and larger amounts. Depending on what your income is like, you could easily borrow several thousand pounds with a single loan. The lender will take a look at your proof of income to determine whether or not you will be able to pay back the money on time. This is one of the biggest deciding factors in whether or not you will be approved.
Can I get a Payday Loan if I have Bad Credit?
Bad credit is actually not typically a problem for payday loan applicants. You shouldn’t have to worry about being turned down for this type of loan based on your credit alone. This is a big part of the reason why these loans are becoming so insanely popular in the UK. If you are having issues with getting approved by your bank, for this reason, a payday loan is an excellent alternative. These days even individuals with stellar credit ratings are applying for payday loans.
What Can I Use the Money for?
You will be able to use the money that you get from a payday loan for anything you want. No private lender will ever ask you what the money is for like a bank or credit union might. This gives you the freedom to use it for whatever you need. It is definitely one of the most flexible borrowing options available to consumers right now. You won’t encounter the same frustrating limitations as with loans from traditional financial institutions.
When it comes to getting a payday loan, knowledge is most definitely power. Some people are still hesitant to apply for this type of loan because they don’t know enough about them. Don’t let ignorance stop you from taking advantage of an incredible borrowing opportunity. These loans are especially well-suited to those who are in dire financial straits. If you need to borrow money desperately for any reason, this is an option to consider. Payday loans have been of great help to many people in a wide variety of situations over the years.