Payday loans are very short-term loans which borrowers avail to cover any unexpected emergency or purchases for which the borrower does not have immediate cash, but is in a position to pay on the next payday, hence, the name Payday loan.
The loan amount in this case depends on previous experience of the lender with the borrower and there is a small fee attached to the loan amount. A lender may provide various options like he may ask for full payment along with fee on the due or maturity date or he may give option to borrower to pay part of the loan before the date of maturity or he may allow borrower to pay only fees on the due date and allow him to pay the loan on the next salary or pay day.
The process for availing payday loan is very simple and fast and can be done in one business day. The lender generally asks for a post-dated check from borrower which he encashes on pay day of the borrower which includes the loan amount and fee payable. If the process is done online, it is much faster and hassle-free. To avail loan online, one must provide bank account statements, social security number and income proof.
A borrower must keep certain points in mind before availing this type of loan:
1. This type of loan must be availed to finance immediate necessary need of short duration as the fee charged is quite high.
2. The borrower must repay the loan by the next pay day because if this is carried forward, the fees attached to it will increase causing undue financial stress.
3. One must have a job before availing this loan.
4. There is no need to provide any security in this type of loan.
5. The borrower must check lender’s fees and compare it with other lenders.
To summarize, pay day loans are to be availed only if one faces short term financial emergency and not to finance any big purchase requiring huge investment as the fee chargeable makes this type of loan very costly affair. The borrower has to think very hard and then decide whether to increase the duration of the loan. It is advisable to pay the loan in one installment itself to lessen the burden of fee chargeable.