What is Payday Loan?
A payday loan (also called a paycheck advance, payday advance, cash advance loan, post-dated check loan, check advance loan, deferred deposit loan, or high-risk loan) is a small, short-term loan that is intended to cover a borrower’s expenses until his or her next payday. A payday loan doesn’t cater for large financial dilemmas that may be resolved better by consumer credit counseling because it is short-term, small and unsecured. To put it another way, payday loan is ideal for fulfilling immediate financial obligations
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Payday loans are generally secured, with payment due in full at the borrower’s next paycheck. Broadly speaking, your next paycheck acts as a security for availing additional financial assistance. The usual term for these finances is 14 to 21 days. These borrowed finances are required to be repaid soon after the next paycheck is credited to your account.
On average, a borrower writes a personal check that is owed to the lender for the amount he or she is going to borrow plus a fee. So, the lender typically provides the borrower the amount of money requested minus the fee. Talking about fees, it is usually a percentage of the face value of the check itself or a fee charged per amount borrowed. Above all, you can extend or roll-over the loan, but then you will be required to pay the fees for every extension placed and moreover these fees can increase over time. For that reason, if you really need a loan it will be essential to repay it as soon as possible.
A payday loan couldn’t suit everyone. For that, it is interesting to know that there are some alternatives to payday loans. For instance, credit union loans, credit payment plans, paycheck cash advances from employers, cash advances from credit cards, bank overdraft protection, emergency community assistance plans, small consumer loans and direct loans from family or friends. It may be wise to consider the possibilities before deciding on a payday loan. Again, it will be wise of you to look for the credit offer with the lowest APR and fees.
All in all, having decided on a payday loan you are likely to find the fees and interest rates quite competitive.