How it Works
Payday loans are small cash loans and they are also granted for a short time period. Due to their unsecure nature they are usually more expensive in terms of interest rates than traditional long-term bank loans. This type of lending is actually pretty young as about a decade ago no one knew about such loans. Yet, now it is one of the most popular lending options that many people resort to.
- The application process is very simple and fast. It starts with a borrowers filling in the application on a website indicating some of the basic personal information required by a lender. Usually, borrowers need to indicate their age (over 18 years old), citizenship (the U.S.), employment (at least 3 months), income (at least a $1,000) and the fact of having an active checking account. This step takes a couple of minutes only.
- Then the application is sent to a lender for review and approval is granted. This step is also very quick, usually borrowers get approval within minutes (in rare cases within an hour) after they apply. Payday lenders refuse very few applications, they are eager to help anyone with financial problems. Neither do they ever base their rejection on the ground of a borrower’s bad credit. Payday lenders do no really care about credit scores and they do not perform credit checks. The latter makes the entire process much faster.
- Money transfer comes next. That is where checking account is needed. The cash is transferred directly to a person’s account and it also is withdrawn from it automatically on the day of the repayment. The date of the repayment is usually agreed by a lender and a borrower mutually in advance. It is usually in a fortnight or in a month. There is no need in any direct contact with a lender; everything is done automatically and electronically and the only trouble is that when the due day comes you have insufficient funds on your account. It is recommended to avoid such situations as they result in various bank and lender fees (NSF fee, for instance).
- Basically, these are the main steps of a lending process. However, a person can have a need to make a roll-over. This possibility should be discussed in advance with a lender as not all the states allow extensions.
Payday loans have long proved to be pretty effective when it comes to financial shortages. Small cash loans are very helpful in various emergency situations; and this feature as well as their broad availability to various borrower groups have made them very popular indeed among many customers, and not without a reason.