Payday loans, or short-term loans with a comparably high interest rate, are becoming more and more relevant in today's society. For the most part, payday loans are maxed out at £500, so a person is unable to borrow more than the allotted £500. The agreement is that the loan will be repaid as soon as the borrower's next pay check comes along. Different areas have various laws regarding payday loans, so depending on the country or state in question, payday loans are able to be attainable through a storefront payday lender organization. If a borrower does not want to get a payday loan through a storefront payday loan place, they can try to get one through an online payday lender organization.
How to Get a Payday Loan
Luckily, there are no credit checks for payday loans. Furthermore, there are no uncomfortable bank meetings nor are there judgmental looks from people giving out the loans. Once the borrower decides if they want a storefront payday loan establishment or an online one, they can set up a time to talk to someone in order to set up a contract.
Usually, people are given 14 to 30 days to pay the loan back; however the actual date is always outlined in the contract between the lender and borrower. There are several state laws that clearly set a maximum amount for a payday loan fee. Studies show that the fees range from £10 to £30 dollars per £100 borrowed. In other words, if someone borrowed the general maximum payday loan, £500, the borrower would pay between £50 to £150 in fees If a borrower were to look at the APR of a payday loan,, they would find it is is astronomical. For example, if a payday loan were to charge £15 for each £100 borrowed, the APR would be about 400%, while many credit cards range from 12% to 30%.
Most of the time, people are expected to pay back their payday loan in one payment. Usually, in advance, a borrower would write a post-dated check for the total (the loan plus the fees). Sometimes, borrowers allow the lender to virtually take money from the borrower's bank account. If the payday loan is unpaid or late, it is normal for lenders to cash the check regardless, or, if the case allows for it, to withdraw money from the borrower's account electronically.
Why Use Payday Loans?
First of all, payday lenders do not use a credit check to scan their borrowers. Credit checks, which can be actually harmful to one's credit if they check too frequently. The fact that payday loans don't look at a borrower's credit lets people who have made some financial missteps in the past have the same access to achieve success as their more financially fortunate peers.
Furthermore, the loans are quick. They are intended to help in case of emergencies and serve as a life raft to families drowning in debt. Even though some may argue that the APR rate is too high, thus making payday loans useless. However, this belief could not be further from the truth. Payday loans are meant to be paid right back. To pay a 400% APR on a onetime loan is far less costly than what credit card companies do. While the APR may be low, banks expect borrowers to pay the minimum every month, which costs more in fees than a payday loan.