Payday loans, also known as the paycheck advance, are a short term loan in a small amount. This loan is supposed to cover the borrower’s expense until the next payday. This type of loan is sometimes also referred to as cash advance. The law about loans varies depending on what state you’re in.
To avoid excessive, unreasonably high interest rates, some laws limit the annual percentage rate or the APR that any lender, which includes even the payday lender, can charge. There are even some laws that restrict payday lending altogether and there are some that have very few margins about it.
Most people get their salary only once a month and it’s usually at the beginning of the month. People who do not know how to budget their finances properly often find themselves in a financial situation in the middle of the month and this is when they avail of a payday loan. Whatever your reason may be for getting a payday loan, know that this short term loan usually comes with a higher interest rate compared to other loans. However, those who prefer to avail of the payday loan do not mind the high interest rate because they know that they need to pay back the loan in a short span of time, so the extra payment isn’t too much for them.
You might be asking, how do these people get out of the financial situation they’re in that quickly? It is because the payday loan is processed fast; sometimes you can get it in just a span of one day. In fact there are other lenders who lend you the money that you need in just an hour.
The things that you need to prepare to avail the payday loan is a photo identification, proof of your income where they will base how much the lender will loan you and a post-dated check that the lender will cash in by the time the due date rolls by. There is also another fee apart from the interest that you must pay. The lender, in return, will provide you a document where the terms and conditions are stated and this will include the amount of loan, the interest rate, the due date, possible late fees and other details that will guide you about the loan. Always read the document before signing it because it is better if you know what you are getting yourself into first.
Now that you already have an idea what the payday loan is all about, you have a back-up plan in times that you are in a tight financial situation. But always remember that this comes with a big interest rate so you must be responsible in repaying the lender within the agreed timeframe of the loan which is usually just for a month. Look around for lenders who charge the lowest interest rate and this time, make a plan of all your expenses the next month so you wouldn’t find yourself in the same situation anymore.