Posts Tagged ‘payday loans’

How Payday Loans Work

If you need some emergency cash to get caught up on bills or pay for an unexpected repair then you may be wondering how payday loans work.  There are several steps involved with getting a payday loan including making sure the you are qualified, securing the loan, and making the repayment.  Here’s a closer look at the entire process to give you a better understanding of how payday loans work.

Do You Qualify For a Payday Loan?

Qualifying for a payday loan will vary greatly based upon the lender that you go through.  There are several qualifications which are fairly standardized across the industry.  For example, you must be currently employed or receive some form of regular income through a government program.  The amount that you must make will vary based upon the lender, however it is normally around $1000 per month.  Additionally, you must be at least 18 years old, a citizen of the United States, and will need an active savings or checking account which allows for direct deposit.

One of the things that makes payday loans different is that they will not require a credit check or any type of collateral.  This is what makes them much more easily accessible than a traditional loan from a bank or credit union.

Applying for a Payday Loan

The application process for a payday loan is fairly simple.  Depending on where you get your payday loan from, you will need to fill out some paperwork either in person or online.  In general, it is estimated that the entire process will take between 10 and 20 minutes.  Once you are approved, the funds will be deposited directly into your bank account.  While this often happens immediately, it can take up to 24 hours to receive your payday loan.

Once you have been approved for a payday loan, you will be required to get the lender a physical check or electronic check for the amount of the loan, plus interest.  Keep in mind, that the interest rate for payday loans are much higher than a traditional loan, normally it will be 15% or higher.

Paying Off Your Payday Loan

The easiest way to pay back your payday loan is to simply have them deposit the physical check or electronic check you gave them.  When you accept the terms and conditions of the payday loan, they will let you know when the required payment will be deposited, normally between 14 and 30 days later.  If you cannot afford to pay the entire amount back, then there are some additional options which will normally be made available to you.  For example, you may be able to pay part of your loan amount back and roll the additional amount into a new payday loan.  You also have the option to pay back only the finance fee and roll back the full loan amount into an additional loan.  This is similar to how pawnshops operate when you on an item for a certain amount of time.

A Recap Of How Payday Loans Work

Overall, the process is fairly straightforward.  You begin by making sure that you will qualify for a payday loan.  Once your application is been accepted, you will be given the loan amount within 24 hours.  Finally, when the repayment date has arrived, you can either pay back the full amount or rollback a portion of the remaining balance into a new payday loan.

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