Unlike banks, payday loan lenders don’t have strict qualifications for applicants. They tend to target people who have difficulties obtaining a loan at a financial institution. When you need to get a loan fast and do not qualify or cannot wait several days to get an approval from a bank, a payday loan may seem like a perfect solution.
Payday loan process is very easy to understand even if you are not financially savvy. You give a payday lender a personal check for the amount of the loan plus a finance fee and receive cash in exchange. When your next paycheck is deposited into your checking account, the payday lender cashes your personal check. If you are unable to pay the loan on that day, you can extend it for another pay period for an additional finance fee. You may pay off your loan early with cash. The finance charge may be prorated based on the number of days you had the loan.
Of course, a payday lender won’t give money to just anybody. You must provide the proof of income, such as paycheck stubs or bank statements showing the direct deposits from your employer. You may need to provide two or three most recent bank statements to show that your account is in good standing and has not been recently overdrawn. Loan requirements may vary by lender.
A payday loan may seem like a reasonable solution when you don’t have access to cash. Keep in mind that the finance charges are usually very high. Some states have adopted laws to keep the payday loan charges low, between 15 and 20 percent. Lenders in other states may charge as much as 50 percent. If you cannot pay the loan off in the first month, the charges add up and after a few months may even exceed the original loan amount.
If you find yourself getting payday loans every month to fill in the gap between your paychecks, you probably need help from a financial counselor. He can help you assess your financial situation, find a solution to your cash-flow problem and to create a budget that will let you live within your means.