Common Benefits Of A Payday Loan

When times are tough financially and you find yourself short of money, you might considered turning to one of many companies who can offer you a payday loan. Since there are seemingly hundreds of companies to choose from with differing terms and conditions, it is likely that you will have more questions than answers about these loans. We shall have a closer look at their features and benefits and hopefully address some common queries.

For those who do not already know, a payday loan is simply a low value, short term cash advance which is for the purpose of covering short term expenses until their next payday. Loan applications are usually made online although some providers do accept applications by telephone. Only basic financial details are required and it is not uncommon for loans to be approved within a matter of minutes and funds to be deposited on the same working day.

The loan repayment is made automatically on the repayment date you have specified by taking funds electronically from your bank account. It is normal for both the repayment of the borrowed amount and the finance charge to be taken together as one lump sum. If for whatever reason you cannot repay the loan at this time, it is possible to defer the repayment by a further month. This assumes that you are both in a position to pay the finance charge, and are willing to pay a further finance charge in the following month.

The majority of people who opt for a payday loan are usually people with a poor credit record. They are an appealing option as these loans have a very high acceptance rate and little if any effort is made to verify the financial information provided. Adverse credit history is rarely a problem and it is common for people who have been turned down for other forms of credit to look at this type of short term financial solution.

While credit checks may sometimes be carried out, this is in fact rare. It is also uncommon for the provider to contact your employer to verify the information you have provided. If any supporting documentation is required, it is usually just a copy of a pay slip or a bank statement. The exact information you need to provide varies significantly between providers. If you are uncertain about what checks will be undertaken it is best to simply call the provider and ask them.

Other benefits of this facility are the speed in which the application can be made and approved, and the general ease of the whole process. There is normally no need to even speak to another human being and there will be no awkward questions about past history that some may find embarrassing.

As with all forms of sub-prime borrowing, the real disadvantage is the cost of the finance. Since there is such a high risk of default, the interest rate charged is equally high to reflect this. The high charges have been the subject of much criticism, so much so that loans of this nature have been banned in several US states as it is a widely held view that they target extremely vulnerable members of society who can least afford to be exploited.

There is no doubt that a payday loan can be an extremely useful short term credit solution, but if the borrowing becomes longer term in nature then it will become overly expensive and unaffordable. Before opting to apply for such a loan you should be fully aware of how they work, and you should read the terms and conditions thoroughly before making any sort of commitment.