What is a Pay Day Loan?
You have probably heard of payday loans, which are a short-term loan, typically either $500 or less. You will usually be required to pay it back the next day, along with additional fees. Depending on the state you live in, payday loans may be available online or through storefront lenders. People will often apply for a payday loan if they’re between paychecks or have to pay for unexpected expenses.
Common Features of a Pay Day Loan
- A Payday loan is usually required to be repaid in a single day or the borrower’s next payday. The loan is typically required to be paid no later than 2 to 4 weeks from the date the loan was issued or whichever date specified in the loan agreement.
- A Payday loan is usually for a small amount less than $500, although limits may range above or below this amount.
- In order to repay the loan, you’re often required to write a post-dated check for the amount in full or the lender may request authorization to electronically debit the past due amount from your account, which includes additional fees.
- The loan may be provided to the borrower in cash, check, or electronic transaction.
- You may be required to pay off the loan in one lump sum or depending on the state, the lender may roll-over or renew the loan, the borrower will then only required to pay the fees, which the lender would then extend the due date of the loan itself.
Benefits of a Pay Day Loan
A majority of lenders will approve your application almost instantly, as long as you provide the necessary information. The application process usually only takes a few minutes to complete and is relatively easy. Unlike a traditional loan, which will usually require filling out lengthy forms, along with a long approval process, a payday loan is simple and the funds are often available within the hour. One of the benefits of a payday loan is it provides you instant funds in case of an emergency.
The process, along with the interactions that are involved when it comes to applying for a payday loan can often be performed online, which means it doesn’t require booking an appointment with a lender or loan officer. You’re able to simply submit your application online from the comfort of your home. Most conventional loans require multiple meetings with your lender before the loan is finally issued. Another disadvantage of most traditional loans is, they’re usually issued for a specific purpose, but with a payday loan, you can use it to pay for virtually anything, including car payments, shopping, or utility bills.
Traditional loans often have more requirements, which may require collateral or a high credit score, but with a payday loan, there are fewer requirements involved. The requirements of a payday loan will usually include verifiable income, active checking account, along with registration as a permanent resident in the state you reside in.