Finance, Loan, Payday Loan

What Is A Payday Loan And How Does It Work

There are a lot of unexpected things happening every day. Things like medical emergencies or some other kinds of financial emergencies, and if you’re like most people who don’t have any money in their savings account, you might want to know what a payday loan is.

A payday loan is quite different from a regular banks loan. These kinds of loans are usually for a smaller amount of money and for shorter periods of time.

For example, when you go to the bank you will take a loan and repay it over a few years, but with payday loans, it’s usually more like two weeks.

You can look at payday loan something like an advance on your salary. People call it different names, like payroll loan, short term, salary loan, small dollar loan, cash advance etc.

From these names you can kind of get the picture of what it really is. So how much money can you borrow?

The money you can borrow goes as high as one thousand dollars. It usually varies from 100 to 1000 dollars and as we’ve mentioned before, you will have to repay it in the next 14 days, usually when your next paycheck kicks in.

There are a lot of retails that offer payday loans and there are even some you don’t even have to visit personally, you can simply visit them online and ask for a loan.

So what do these companies ask for before they issue a loan? The answer is – not much.

They don’t care about your credit history or your savings account, the only important thing is that you will be able to pay it back, and ”paying back” should be important to you as well, and here’s why.

Payday loan usually has a fixed rate on 100’s. For example, you will pay 15 dollars for each hundred dollars you borrow. So if you borrow 500 dollars, you will have to return 575 dollars, but, if you fail to do so in a fixed time frame, you will get burned.

The interest rates and additional fees are incredibly high. If you fail to repay on time, you will have to pay a lot more. So while applying for a payday loan, make sure you will be able to pay it back when the time comes.

The information these companies take is usually regarding your personal information and your job. They will ask you to write a check for, let’s say 575 dollars which they are allowed to cash in from your next paycheck should you not return and pay it personally. If they can’t get that money from your paycheck because there is not enough, then additional fees kick in.

These kinds of loans are good for unexpected emergencies, but before you apply for any kind of loan, make sure that it is absolutely necessary. Take a step back and think about other options, if you can’t find any other solution, then apply for the payday loan.

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Payday Loan

Direct and Indirect Payday Lenders

Believe it or not, but most times when we are in a financial dilemma, it is always a lender that appears as a savior. The only thing that could save us from money problems is a little extra money itself. And even in those times, not every lender is up and ready to help you, considering your credit history might not be so good, or your credit score is not up to the mark. Most times even banks refuse to assist in such tough times, when they see that the income of the person is barely much or if the borrower has nothing to offer as collateral.

In fact the only lenders that can help the borrowers are these two kinds of payday loan providers; direct lenders and indirect lenders. Since it is payday loans that we are referring to, they could easily be approached through a thorough research on net. But first let’s understand the difference between these two kinds of lenders:

1.     Direct Lenders:

 A direct lender is the one who lends cash to the borrowers himself without involving any middleman or a broker. When a person approaches a payday storefront or a financial institution directly to apply for a payday loan and get it from the same source then it is said to be a direct lender. Since they are almost as concerned about getting the amount back as the borrower is with returning it, they seem to sympathize with the borrowers and offers them some flexibility and various options that best suits their needs. Connecting with payday loan direct lender for acquiring the loan also makes the process faster of as it doesn’t have to go through one more channel before reaching the source.

2.     Indirect Lender:

Payday Loan Direct LenderAn indirect lender is the one who does not lends money himself but acts as a broker or a middle man between two parties. An indirect lender provides a connection between a borrower and a creditor. How do they benefit from this deal? They get compensation from the lenders when they provide them with a borrower. This doesn’t necessarily make them dangerous or untrustworthy, but they’ll do anything to make sure that the person is taking the loan, regardless of the act whether a person will struggle at the time of repayment or not. Some indirect lenders in their task of selling, even ends up misguiding the borrowers which cause a lot of problem for them later. However there are also many indirect lenders out there who have connections with some good lenders who provide good interest rates and flexible payday options.

Payday lending is a short term advance loan that offers instant cash to the borrowers with quick approvals, and easy application process. They could be acquired either through a direct lender or an indirect one. Since it is a loan without any background check or a credit checks, it is only for a short time period and has to be returned by the next payday of the borrower.