Most of us have heard of payday loans at some point in time. But what exactly are these loans? Here, are the answers to some of the questions that come up while discussing payday loans.
What Are Payday Loans?
In brief, these are short term loans that help you cover your expenses till you receive your next pay check. We have all been in situations where we’ve needed money, urgently, for something such as a medical emergency, buying presents during a particular holiday or paying off some big bill. We might not always have cash available to meet with these expenses. This is where Payday loans come in.
How Does This Work?
If you need money urgently, you can contact Payday loan agencies and ask for a certain amount of money. Depending on your income, the loan amount could vary from $200 to $1500. You write out a post-dated check to the loan agency, adding interest charges. The agency would deposit the check before your pay date. In some cases, you may even give the agencies your bank account number, and the repayment of the loan will be done electronically.
What Are The Requirements for Getting A Payday Loan?
You have to be 18 years or older. You need to have a steady source of income. You must also have a bank account and a social security number.
What Are The Pros And Cons Of Payday Loans?
One of the biggest advantages of payday loans is that, if you meet the requirements, you get the loan within 24 hours. You do not have to put up any collateral and there are no credit checks carried out.
High interest rates are one of the biggest disadvantages of Payday loans. The interest rates could go up to 300% in some cases. If you can’t pay back the loan amount in time, you do get an extension but the interest rates just get higher and you could also be required to pay a penalty fee. If your check bounces, you could get a negative credit rating with agencies and that would make it difficult for you to even open a new bank account.
Payday loans should be used as the last resort for any kind of financial emergency. If you do take a Payday loan, the most important thing to remember is to pay it back on time.
