A payday loan is a short-term loan that comes with high interest. The amount is repayable on the next payday of the borrower. You can get a payday loan online or through real-time payday lenders. They help to make emergency or important payments that cannot wait till the next paycheck.
Payday lenders offer cash advances called payday loans based on the income or credit profile of the borrower. These loans not only carry a high interest but also charge borrowers high fees. They are recovered by the lender by reducing the borrower’s paycheck. Borrowers will have to show pay stubs from their employers to the lender to get a loan and some lenders use the salary of the borrower as collateral. The duration of the loan is for 30 days or less. The purpose of the loan is to help borrowers meet short-term expenses.
A short-term payday loan is popular with borrowers facing financial difficulties. These loans are often given without doing a credit check. Once a person shows a pay stub, an expert payday loans is given without doing a credit check. A no credit check payday loan comes with a specific approval process. Lenders will check the employment history of the borrower and find information about their previous debts before advancing a loan. Since the loan is unsecured, payday lenders may in addition to high interest and fees add credit insurance costs to increase the amount they take from the borrower’s paycheck.
Payday lenders target low-income groups and are regulated by laws in many states. In 28 states, these loans are allowed with few restrictions. Federal laws bar payday lenders from charging active-duty members of the military more than 36 percent Annual Percentage Rate (APR). These loans are banned in 15 states including Washington D.C. Eight States have a level of regulation. They set a cap on the interest payday lenders can charge or limit the number of loans that borrowers can take annually or, ask lenders to give longer terms for the loan than the conventional two- week repayment term.
There are many easy-repayment alternatives to a payday loan. If you are a member of a credit union, you can get a low APR short term loan from the union. You could apply for an interest-free overdraft from your bank. Payday lenders often target students and charge a high-interest rate on student loans. If you are a student, you can get a low-interest government student loan as an alternative to a high-interest payday loan. Using your credit card is another alternative to borrowing from a payday lender. You could also ask for help from family or friends for a loan or ask your employer for an advance as an alternative to getting financial help from a payday lender.
Payday loans help low-income groups and borrowers with financial difficulties meet emergency or important short-term payments before their next paycheck arrives. They come at a high cost and should be avoided because they could lead the borrower into a debt trap.