What is a Payday Loan

A payday loan is a fast way of borrowing a smaller sum of money to tide you over until the next payday. Obviously not everyone is going to agree with the ethics of this type of borrowing but it can stave off an impending financial crisis. A vast number of people are salaried, that means that wages are deposited into their bank accounts on a monthly basis. Exceeding an authorised overdraft limit can be costly and same day payday loans are one way of avoiding paying out heavy bank charges.

Financial planning takes forethought and working to a tight budget may mean that the family finances are often stretched to breaking point. If a household appliance breaks down or the car needs some essential repairs then there may not be sufficient spare cash in the bank to cover the costs and this is where a payday loan may come in handy.

There are many payday loan companies who advertise online and it is sensible to compare the terms and conditions of several before applying for a cash advance. These short term loans are unsecured and many lenders are willing to turn a blind eye to a poor credit history. The application forms are filled in online and submitted to the lender who then gives an answer within minutes or at the very most hours.

The online application forms are easy to understand and simple to fill in and the whole financial transaction can be carried out in privacy. The financial institution assesses the application and makes a decision. All payday loan companies are bound to comply to the responsible lending policy which means that they will only lend what the borrower can afford to repay. The lenders will need to know some personal details which include name and address, proof of an active bank account, proof of earnings and proof of residency, only persons over the age of 18 are eligible to apply for a payday loan.

The aim of the loan is to provide cash until the next payday so the client will be repaying the sum borrowed in full plus interest when the next month’s wages are paid into their bank account. At first glance the APR seems extortionate but it is not as harsh as it seems. There is a set fee for very $100 borrowed and that fee will be somewhere around $22 so if the lenders grant a loan of $100 the amount to be repaid next payday is going to be $122.

If the firm consents to the cash advance then the money will be deposited into the borrowers account in record time. A direct debit will be set up to collect the repayment and the date will correspond with the next payday.