The money is frequently borrowed using a post-dated check or an account withdrawal permission, which affects the borrower’s next payday, thus the name. These loans should be quick and straightforward to qualify for if the applicant has a job. Payday loans often referred to as cash advances, deferred deposit loans, post-dated check loans, or check advance loans, are intended to help people get by until their next paycheck arrives. In some situations, you could be approved for a loan in as little as 15 minutes. You will need to give a check for your loan with the lending fee and they will keep this until you finish paying your loan.
When the loan is due, the borrower has the option of paying it off in full or allowing the lender to cash the post-dated check or withdraw funds from their account.
Risks of Payday Loan
When these loans are not paid off due, many borrowers find themselves in financial problems. More fees are added to the loan each time the borrower extends it. According to the Consumer Financial Protection Bureau, payday lenders levy $10 to $30 for every $100 borrowed. The annual return on a $15 fee is almost 400 percent. Payday loans are available to people with bad credit and do not usually require a credit check. Payday loans are used by around 12 million Americans each year, most of whom do not have access to a credit card or a savings account.
Payday Loan Interest Rates
Lending conditions should not be the primary consideration for people considering a payday loan. Payday loans sometimes have annual percentage rates of 500 percent or even 1,000 percent. Payday loans are still a costly alternative that you should approach with caution, even though business models and legislation limit the amount and duration of the loans.
Payday loans are the most expensive way to borrow money due to their high rates of interest. Some states have laws governing the amount of money payday lenders can lend and the fees they can charge, while others have outright prohibited payday lending. Lenders typically work past limitations preventing them from operating by forming relationships with banks in other states.
Amount of Payday Loans
Even though most states have laws governing payday loan amounts, the amount that qualifies for a loan varies depending on the borrower’s income and the payday lender. Several states even prohibit borrowers from having multiple outstanding payday loans to discourage people from borrowing large sums of money at high-interest rates. Loan amounts might range from $70 to $1,500, depending on state law.
Once you’ve gotten out of the financial bind that prompted you to seek a short-term loan, focus on being proactive: learn how to manage your money so you can live within your means and avoid having to borrow money to get by until your next paycheck. At the absolute least, make it a habit to keep track of how much money you spend and how much you earn so you can figure out how much money you’ll need to save for the necessities.
