What Is a Payday Loan?
When you want to receive a certain sum of money from a lending service, you make a payday loan request. The right of a lender to extend high-interest credit based on the borrower’s income underlies the main concept of this service. In a nutshell, immediate credits are charged with high-interest rates within strict and well-defined periods that usually take no longer than a month. Some organizations may offer these services under the name of cash advance loans.
How do payday loans work?
Before giving their funds, the loaners, usually, users to prove to have regular earnings to pay out the borrowed funds under the required conditions. For this, you can ask the employer to give a paper outlining your payroll information. As a rule, providers give borrowers up to 30 days to pay the money back. In some cases, the terms might be even shorter.
This variation of lending is considered risky for lenders. Although they check the source of the borrower’s income, providers aren’t 100% sure that this will be enough to pay back the funds completely. This is the reason why such services come at high rates. You should also keep in mind that because of the willingness of providers to protect their funds, they might charge high fees for missing repayments. That’s why payday loans aren’t completely safe for borrowers as well.
How much does a payday loan cost?
This is mainly by a lender. However, as a rule, they charge a percentage or dollar amount per $100 borrowed. Again, such conditions are determined by specific regulations in your state. The average dollar amount is $15 per $100 borrowed. For instance, if you borrow $1,000, you’ll be required to pay back $1,150.
How much can I borrow with a payday loan?
The limits of borrowing rely on the permissions in particular states. Usually, people borrow from such services around $300 under the requirement to pay them back in two weeks. The minimum amount usually falls as low as $50. The maximum sum doesn’t exceed $1,000. The most loyal lenders provide 62 days to pay back the maximum available amounts, but these aren’t common occasions.
What do I need to get a payday loan?
In the vast majority of cases, people apply for payday loans through online services. As mentioned before, they want to be sure about the stability of your income. That’s why they might require you to provide a special document from your employer. Lenders want to be aware of your salary because they might also use it as collateral. Except for this, they might also require you to have a bank account. Some lenders ask borrowers to provide ID documents to verify their age.
What happens if I can’t repay a payday loan?
Not all borrowers can have the possibility to pay back the money within the pre-determined terms due to exceeding interest rates. If the conditions of a payday loan aren’t satisfied, you might be charged additional penalties. Also, borrowers who don’t have might face issues with collection agencies. Lenders might file a lawsuit against you, as well.