What Payday Loan Lenders can Expect
A payday loan also called payday advance or cash advance is a small unsecured and short-term loan that payday loan lenders could avail. It is small because lenders could only borrow an amount that ranges from $100 to $1500. It is unsecured because there is no credit check or collateral needed to avail the loan thus putting the lender and borrower at high risk. It is short-term because the loan easily matures (one month term only).
Repayment of the loan is usually linked to the borrower’s payday terms. This means that the borrowed money will automatically be deducted from the borrower’s next salary. Some loan providers allow payday loan lenders to issue a post-dated check that is dated on the borrower’s salary day.
It should be noted that every state has different legislation that guides the processing of payday loans. Every lender should be aware of this. Some jurisdictions prevent usury loan rate by limiting the lender’s annual percentage rate.
Advantage and Disadvantage
Payday loans can be availed immediately unlike with secured loans provided by banks. This is great for those who immediately need money such as during accidents sudden hospitalization unexpected school payments and the likes. Payday loan also matures in a short time thus lenders would be motivated to find ways to pay it immediately in order to get rid of high interest rates. Those who are aged 18 years old are currently employed and have bad credit lines can automatically become a credible payday lender.
The negative side of this type of loan is the interest rate. The payday rate is actually quite high than its counterparts. For a $100 loan (2 weeks maturity) the charge is almost $15. This continually increases if one could not pay the loan on time.
The Loan Process
A payday loan can be availed in two ways: through retail stores or through online payday stores. Both sources have specific requirements that should be fulfilled before making a loan. Some of their requirements are: at least 18 years old is currently employed a bank statement a proof of salary (including salary range) and a proof of citizenship. More reviews here
Retail stores require the lender to visit the store and issue a post-dated check. The check will be dated on the day that the loan will mature. The lender should come back to the store on the day the loan ends and repay the loan. In case that the lender did not come back the lender could claim the check and deposit it on his account. There will be an additional charge if the check bounces back (due to insufficient funds) such as a bounced check fee. Aside from this an increased in interest rate also awaits the borrower.
For online shops the borrower would just have to visit the site and fill-up the application form. A bank account is needed here because the loan will automatically be entered in the account- so as the repayment.