A payday loan is a type of short term loan where an organization or individual borrows small amount of money at a very high rate of interest. It is a type of loan whereby a borrower writes a post-dated check containing the amount of money she/he could wish to borrow and an extra fee and in return he is given cash.
This type of loan can also be referred to as cash advance loans, check advance loan, payday advance, salary loan, payroll loan, small loan or short term loan. For one to be eligible for a short term loan like the payday loan he/she must be a holder of a financial clean record.
This type of loan is unsecured; it does not matter if the loan repayments are linked to the borrower's payday. For one to qualify for a payday loan the borrower must be in possession of previous payroll and employment records.
When the loan matures the borrower is supposed to pay back the loan fully of which failure to do so the lender may end up redeeming the check to recover back his money. When the borrower's account has no sufficient funds to pay back the loan in this case the borrower has to face a bounced check fee from the lender which he will have to pay in addition to the loan costs and he may also face increased interest rates.
It is easy to apply and qualify
Payday loans are short term lending which are very easy to apply since all the application processes are done online, one can easy send his/her application for the loan from home to the bank offices. For application of the loan one does not have to book an appointment with the bank lender officer unlike other type of loans where one has to follow so many procedures and arranging very many meetings with the bank officials so that he/she can be given access to the loan.
Qualifying for a payday loan is also easy since the only requirements for one to access the loan is he/she must have sufficient income and should not have been a defaulter of any previous loans.
There are different laws placed in place by different states to protect borrowers from being over charged. The pertinent laws ensure that a client is not humiliated by being made to pay high interests therefore the law puts in to place who interests should be applied.
Most states do not allow charging interests rates above a certain percentage therefore borrowers are not exploited.
It is fast
Filling in application forms and receiving the financial aid takes a very short time. Many situations can be saved and a lot of thing may not get out of place since the loan processes are fast and feedbacks are given almost immediately.
Personal information security
When applying for payday loans one is assured that his personal information is secured. This is because payday institution does not give out private information of their clients to other companies. All lenders use data encryption system to ensure that their information are kept safe and this prevents unauthorized access to a lender's personal account therefore one's private information is secured.
They are flexible
Payday loans are flexible since they are short term loans. Short term loans mature within a short period of time and therefore they are easily repaid. Through repaying the debts in a short period of time the borrower does not have to undergo through paying debts for a long time, Clearance of repayments plans early enable one to have a clean financial record which also may give a lender access to getting long term loans like mortgages.
Good for emergencies.
Since payday loans can be obtained within an hour therefore they can save many situations. The money from payday can be used to settle different bills like electricity bills, pending school fee arrear and this ensure that things do not get out of place.
One can qualify for higher loans
Payday lenders usually have loan limits for starting borrowers to their salaries but once a borrower pays the loan on time he is entitled to a loan increase depending on the lending policy and the borrower's salary.
Protects one's credit card
Since payday loans mature within a short time and repayments are made within a short time which may see at first a short coming to the borrower but it is an advantage to his credit card rating. Taking short term loans in case one looses the job one may still manage to pay back the loan hence it is a good for a credit card.