What You Should Know about Payday Loans

by Redeeming Riches on February 8, 2013

Nowadays it is hard to find a person who has never heard of payday loans and really the majority of people living from paycheck to paycheck applied for this service at least once. Unfortunately, life is not really easy and sometimes it brings about complications and they are always unexpected and often unpleasant. Much less frequently we win a lottery than receive a pile of bills due to be repaid in the shortest time possible. Not every time it happens  so that a person is able to solve some financial issue without hassle and fast. Sometimes it ends up with debts and spoiled credit rating.

There are ways to deal with emergency financial situations and one of them is to apply for a payday loan. Here are some arguments why this well-known option is worth trying even if it is expensive.

Payday loans refer to the group of cash advances that are short-term and do not require collateral. These are unsecured loans that are offered to a person until the next paycheck for a period of 2 weeks on average. They are easy to get as the application and disbursement process takes just about one business day and in some cases even several hours. The benefit of such lending is also in the non-demanding nature of lenders. The latter have very few requirements to their customers and this makes such loans available to a pretty broad group of borrowers (as opposed to regular bank loans that feature many restrictions and requirements).

The most controversial subject is the cost of payday loans. Surely enough the interest rates are just exorbitant. This is explained by the fact that this type of credit takes little time to get processed and a person can apply for it any time. Besides, lenders also point out that there are no credit checks and no interest in a person’s credit – either good or bad. All these factors make the process of lending much more straightforward and less time-consuming than any similar bank loan procedure. Now with the possibility of online lending has made it all possible for borrowers to find the best offers and compare the prices – it is a real benefit.

The rate of interest differs with regards to the states where a lender operates and in this respect rates can be higher and lower. There are states where payday lending is prohibited and also states where strict regulations are implemented and in order to be able to operate lenders should abide by the laws of these states.

One of the best features that attract a great number of borrowers is the absence of credit check. Many people are unable to get a regular loan just because their credit score is not that good and frequently even poor. This reason alone is able to disqualify a person from being a potential customer of a bank. But it won’t ever affect the chances for approval with payday lenders.

Another benefit of payday loans is that they are easy to be obtained and that they have really few requirements in comparison with the bank procedures. A person has to be an American citizen, over 18 years old, employed and with the ability to proof a monthly income. Basically, this is quite enough for a lender to give approval for a payday loan. A checking account is also necessary as all the money transactions are arranged electronically.

Payday lenders should abide by state laws and the Truth in Lending Act. In accordance to it all the lenders should disclose their terms and conditions before the agreement is signed. All the rates and repayment dates and any fees or additional cost of a loan should be made known to a borrower before the loan is actually issued.

Payday loans cash advances are meant as emergency loan option because they are fast to get and expensive in terms of repayment. In this respect they are recommended to be applied only in cases of emergency and when other options are unavailable.

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