Payday Loan Basics: Understanding the Ins & Outs
Unexpected expenses are almost always unavoidable. Unfortunately, these types of expenses usually happen when payday is days away. The good news is that you can always depend on payday loans to bridge the gap between paydays. You not only get the money you need in a fast, efficient manner, you also save yourself the embarrassment of having to borrow money from friends or relatives. If you are planning to apply for a payday loan, you need to arm yourself with information prior to requesting one to ensure the most advantageous outcome for you and your finances.
A payday loan is a small, unsecured loan that is obtained through various means, most typically online. In order to obtain a loan, a borrower will authorize their chosen lender to deposit funds directly into their bank account and authorize that same lender to remove the funds and fees upon the agreed repayment time.
The lending company will hold the electronic debit authorization for five days or more, depending on the borrower’s payday date, which typically gives the borrower two options. He could;
- Pay his debt in full in exchange for the removal of further payment obligations
- Renew or roll over the loan if the borrower is unable to pay his debt
A payday loan is designed to be a quick solution for any monetary problems. It is not designed for large purchases such as funding for a new house or car. The fact is, payday loans do come with higher interest charges. The reason is that payday loan companies do not conduct credit checks with traditional credit bureaus prior to granting a loan, and are much more liberal in their underwriting guidelines which essentially means that they are willing to extend credit even to individuals with very bad credit histories.
Although getting a payday loan is relatively easy, there are certain requirements that borrowers need to meet before they are granted a loan. Most payday loan companies have very basic requirements.
- Be 18 years old and above
- Have an active bank account
- Are permanently employed
Payday loans are typically due upon receipt of your next payday. The repayment terms will depend on the terms and conditions of the payday company you are doing business with.
Applying for a payday loan is by far the fastest way to solve any immediate financial problems you may have. However, you need to make sure that you are doing business with a trustworthy company.