Payday loan can be described as an unsecured small loan that is given for a short period of time. This loan is also referred to as payday advance and does not necessarily have to be associated with the payday of the borrower. The regular process of this type of loan involves lenders offering the unsecured loan which should be fully repaid when the borrower gets paid next.
Although payday loans are called ‘cash advances’ they can also be in the form of credit cards or any other credit that is prearranged. For lenders to grant these advance loans the persons borrowing should have employment and payroll records. Generally the lender requires that the consumer provide some proof (bank statements or pay stubs) that he or she is employed or receiving an income. The rules and regulations governing payday loans will vary in different franchises companies countries and also different states in America.
In developing countries in the Caribbean for instance these types of short-term loans are becoming increasingly popular and many believe that it is as a result of the eligibility criteria that are known to be quite liberal. Although these loans are expensive to repay most times micro entrepreneurs are the ones that are seeking payday loans. Persons find it favorable to seek loans of this type because of its accessibility and its ability to help persons who are in need of money to deal with emergencies. The method for making online application for payday loans is one that is considered to be very simple and quick. This is thought to be convenient for persons who want money to pay bills or to purchase necessary items. However a downside to easily acquiring a payday loan is that they can become addictive and might even encourage unnecessary and heavy spending.
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The payday loan process involves the borrower writing a cheque that is postdated in the name of the lender having the full loan amount as well as the fees charged. When the maturity date of the loan comes around the borrower is contracted to visit the store in person for repaying the loan. If this is done the cheque can be redeemed by the lender. If the total amount on the check is not redeemable from the account of the borrower he or she may now have to find money to pay the lender the fee for bounced check and this is separate from the fees or expenses involved with the loan.
Payday loans can be accessed online or the consumer can complete the application for the loan by way of fax. The latter method is generally used when the lender requires certain documentation. The amount on the loan application is later transferred to the account of the borrower by way of direct deposit and withdrawn electronically on the following payday of the borrower.
It is found that persons who access payday loans are those that have little assets and have low or middle income. These persons are least capable of securing regular types of credit that have low interest rates.
There are several complaints and criticism of the payday loan and the main one is the high interest rates. However these types of loans provide persons with an easy and simple method of accessing a loan and having access to money that they are usually not able to acquire elsewhere because of the general restrictions and requirements. Several persons who no longer use payday loans have reported that they would use it again if they find themselves in a position where they need quick cash with the least amount of difficulty.
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