payday loan process

There are times when a quick cash loan – one like a payday loan that does not require collateral to secure it -- can be a big help. One advantage to a payday loan is that this is a lending choice that is available even to those with bad credit or no credit. However, this type of quick cash loan does have a significant disadvantage that should be factored in. This can be a costly loan, especially if the repayment schedule is not adhered to precisely, because the associated interest rate is high. Therefore, understanding this borrowing opportunity and using it responsibly is essential.
What a Payday Loan Is and How It Works

With a payday loan, you can borrow a comparatively small amount of cash, usually ranging between $100 and $1500, quickly, even with a bad credit history. That’s because this short-term loan, typically until the next paycheck arrives or for a two week period, is based on employment and income. Payday loan interest rates are significantly higher than other borrowing choices. However, some consider the higher rate of interest to be the cost of convenience.

While the payday loan process may differ in detail from lender to lender, overall, the general requirements and processes are fairly similar. You must be over 18 years of age, have verifiable employment and income, receive a paycheck at least every two weeks, and have a bank account. The funds are usually made available via direct deposit, a check or, when a payday loan is applied for in person at a place offering such loans, in cash. With the fax-less payday loans, the money can be in your hands in an hour or two, and with the more typical sort, you can have the cash you need within 24 hours.

The loan is often secured with a check that is dated for the agreed upon repayment date. An alternative means of repayment is to authorize the lender to withdraw the amount electronically from the bank account on the due date. In addition to the amount borrowed, there will also be a fee and interest to pay.

The interest rate on these loans can be steep, and running the numbers on this short-term loan can come up with annual interest rates around 400 percent, and much higher if the loan is not paid in full by the original due date. Because of the high rates of interest, payday loans are outlawed in some states and strictly regulated in others. Many states do not place heavy restrictions on these types of loans, leaving it to the borrower to decide whether or not the loan is worth the costs.