Understanding the Most Basic Elements of Payday Loans
Being short of cash is tough, especially in certain situations where the degree of urgency for money is high. This is true for most workers who, despite earning enough to cover for their financial obligations, end up not having extra cash to meet urgent needs. Take for instance a medical emergency. Whenever a person gets involved in an accident or a certain family member suddenly goes down with an illness, he or she would definitely have to buy prescription medicine or other related medical expenses. However, it is definitely tough to deal with such a situation when the injury or illness coincides with the individual not having enough cash.
Also, the lack of cash in hand coincides with the deadlines for utility bills payments and other important payments. Indeed, desperate times call for desperate measures, with individuals under such a situation resorting to borrowing money from friends or relatives. Though many take advantage of traditional loans and have access to credit cards, there are some workers who just could not afford them. In any form of short-term financial crisis, one can actually obtain a small amount of money through a payday loan.
Basically, a payday loan is a short-term loan and usually involves the borrower obtaining a small amount of cash which is used to cover for the remaining days until his or her next paycheck. As the name suggests, the repayment of the borrowed amount occurs on the date the borrower receives his or her next paycheck. A type of unsecured loan, it is obviously different from the typical secured, long-term loan such as an auto or home loan. This type of loan is often seen as a solution for people who are temporarily short of cash and are experiencing urgent financial matters.
Typically, a payday loan is applicable for any individual who is 18 years or older, is employed and earns a substantial amount of money every month, and has either a checking or savings account. Credit history is not all that important; whether or not that individual has a good credit can still make him or her eligible for a payday loan. Most of the loan stores that offer online applications for people who intend to avail of payday loans. Truly, the convenience of applying online saves them from the hassles of having to submit documents or stand in line while waiting for their turn inside the loan establishment. Through online application, personal details, contact and financial information are provided, as well as the bank account details, desired amount of the payday loan, and the date of the next paycheck.
The payday loans provider then sends out confirmation via e-mail acknowledging its receipt of the borrower’s application. Later on in the day, the provider would make a decision with regards to the money borrowed to see if the borrower is allowed to receive a loan. A rule of thumb in this kind of transaction is that the individual must be able to borrow money he or she truly needs; a smaller loan amount would not only mean granting the application, but also a chance at a loan with a smaller interest rate.
After a successful application, the loan provider would then e-mail the borrower about the loan details, which include the date of repayment and the interest involved. The intended amount borrowed would then be deposited to the bank account registered during the application. This transaction, from the application to the deposit of the loan, happens within a day. The payday loan, along with its interest, is repaid in the date of the next paycheck. The loan provider would collect the amount borrowed and the interest incurred by debiting his or her bank account.