Earning enough money is essential to lead a comfortable life. However, at times expenses may outdo income, and therefore, one has to keep a tab on their expenditure. Insufficient income, shortage of disposable money, and cash flow mismatch lead to enormous stress in an individual’s life.
Money means different things to different people. Some may see them like freedom; for others, it may be a cause of despair. However, the common factor is that everyone wants a healthy financial condition. Taking loans may not be a long-term solution for good financial health. Yet, the point here is that one needs to recognize Payday loans as a tool and use it smartly to overcome short-term fund requirements.
What are Payday Loans?
Many people, especially from the poor or lower working class, often live from month to month with practically no savings. There is always a common scenario when they run out of money towards the end of the month and somehow manage till the next salary arrives. Taking short-term help from friends and relatives is an option but unfeasible month on month. In this situation, in many countries, instant payday loans are pretty popular. This loan category is for those who do not have credit cards or the required eligibility to get a regular personal or business loan from Banks.
A typical payday loan is a temporary act of borrowing from a lender, where the latter will extend a loan based on one’s income and risk profile. These loans come at high-interest rates for short-term unsecured immediate credit. The loan amount is usually not more than one’s salary. The idea is to cover the principal portion in the next paycheck.
Getting Payday Loans Online
With increasing competition in the lending business, one can see that every financier is making a foray into the instant payday loans business. Individuals looking for payday loans online the same day is now having the option to access several online lenders and get the loan amount transferred into their bank account directly within a matter of minutes.
Payday loan providers are usually small credit merchants with physical point of sale (POS) outlets. They allow immediate online applications and approval. These merchants get a commission for the loans provided to their customers. For payday loans online lenders, it is advantageous when a customer applies directly online as it allows them to save on the intermediary sourcing cost.
Eligibility for best Online Payday Loans
Many online lenders provide instant payday loans. All one needs is to visit the lender’s website and give some basic details such as correspondence details, date of birth, bank account details, identity proof, and employment details. Providing this information online will allow the lender to assess one’s loan eligibility. Once the applicant fills out the detailed application form, the lender reviews the application, processes the application, and disburses the loan to the borrower’s bank account. Most lenders typically provide up to 90% of the borrower’s salary per details provided in the applicant’s monthly payslip. The final sanctioned loan amount can vary depending on the applicant’s profile and credit history.
State regulatory laws for safe Payday Loans
Many states have restrictive laws that limit the maximum amount of loan one can avail, keeping in mind the high interest rates. There are also cap on borrowers who have multiple outstanding loans, including payday loans. The idea is to protect both the lender and the borrower from any defaults and discourage borrowers from having too many high-interest costs payday loans running concurrently. Even though the loan amount can vary from $50 to $1000, many lenders take the borrower’s salary as collateral and conduct a full credit and background check. The background check ensures that the borrowers have the ability to repay the loans.
Why Instant Payday Loans are a saviour for many?
If towards the month if someone has, for example, has a medical emergency, then taking a loan till the next salary arrives is the only solution. Typically, interest is charged on a per-day basis. Anyone taking a loan for a week or pays interest for that period only and close the loan once the salary arrives. The instant payday loans provide flexibility to the borrower as it allows one to exit and enter at any point of time compared to a conventional loan when one has to commit oneself to pay a fixed installment for a fixed tenure.
The disadvantage of Payday loans
Many customers default on instant payday loans when they come up for repayment on the due date. Every time the borrower rolls over the loan, they have to pay additional charges on the outstanding amount. Payday lender’s overdue charges are pretty steep, and the extra charges work out to 400% annually.
Consumers who access Payday loans have a poor credit track record, and stringent credit check is waived off. Most people avail of payday loans online same-day facilities each year, as they do not qualify for a credit card. The financial risks of Payday loans for a customer are high as the high-interest charges push the borrower into a debt trap.
Cost of an Instant Payday Loan
Moneylending companies that provide instant payday loans charge a high-interest rate. The rates are high because the borrower may have a poor credit history. The profile is considered riskier than those who have access to credit cards, savings accounts and eligible for low-cost loans. Payday loan’s annual interest rates can go as high as up to 500%. Since the tenure is always short, ranging from 7 to 30 or 60 days, it is only meant for emergency purposes. Making a down payment for a mortgage loan or purchasing a car should be avoided entirely. Even as interest rates are high, one can still choose from the best Payday loan money lenders operating in the country at reasonable interest rates.
Payday loans are an expensive way to borrow money because of the high costs associated with them. Some laws have put a maximum lending cap to borrowers in many states, and even the interest rates are specified.
Even the best Payday Loans can be expensive
Most states have laws that limit interest charges to a maximum of 30% for conventional loans. However, payday lenders fall under the exemption category that allows them to charge high interest. For example, in California, a payday lender can charge a $100 loan for 14 days, with interest rates going as high as 400% annually. Processing fees are also a significant factor to consider, as the average fee is $15 per $100 payday loan.
Although the Lending Act in different states requires a payday money lender to disclose their interest rates, many borrowers overlook costs. Getting an instant payday loan online the same day is the only thing on their mind in emergencies. Most loans are for less than 30 days. They are inevitably tagged to the next month’s salary as they are meant only to help borrowers meet short-term liabilities. Typically, loan amounts vary from $50 to $1,000, with $500 as standard. The loans can get rolled over for additional finance charges. Many borrowers, as high as 80%, end up as repeat customers.