Is a Payday Loan Right For You?
What are pay day loans? Payday loans are short term loans for a low dollar amount. They are also referred to as installment loans. You can apply for the majority of payday loans via online loans websites. The reason that these unsecured loans are referred to as payday loans is that the term of the loan typically lasts for the remaining time period before the next pay check of the borrower. However, if you cannot repay your payday loans at that time, you can roll them over until your next paycheck. Approval for a pay day loan is not dependent on your credit rating. The only requirement to obtain payday loans is a steady job with a regular paycheck.
Lenders who provide payday loans usually have flexible repayment rates. The initial cash loans often include a grace period that lasts until the next paycheck is due to be give to the borrower. However, many people who get payday loans do not pay back the whole loan as of their next pay check. As a borrower, you can decide whether you want to pay off the loan immediately, or pay a fraction of the entire amount, floating the remainder until the next pay period. After having taken out a payday loan, the lender will electronically withdraw from your bank account a mutually agreed upon payment shortly after your next paycheck is deposited.
Payday loans are meant to provide short term relief to minor and unforeseen financial problems. For example, a good reason to apply for payday loans online would be to pay for unexpected car repairs or medical bills. Payday loans are not designed to solve long term financial difficulties, and using them for this purpose can cause the borrower to end up in hot water.
Bouncing checks written to lenders that provide payday loans will result in the filing of a delinquency report with ChexSystems, which can ruin your financial reputation. Thus, if you take out payday loans, you must be 100 percent certain that you will be able to pay the loan back as scheduled.
Regulations regarding payday loans interest rates and maximum borrowing amounts are set by each state. For example, the maximum amount permitted by Illinois law for payday loans either $1,000.00 or 25 percent of the monthly gross income of the borrower, whichever is less. In order to discourage usury, a legal term involving unethical loan making, the annual percentage rate that any lender, including lenders of payday loans, can charge, is limited by some jurisdictions. Though most companies offering payday loans are fair and above board, a couple of bad apples have participated in unethical activities, i.e. charging exorbitant interest rates and threatening borrowers with fraud or criminal prosecution. Not only are these practices illegal, they have been denounced by the CFSA, the trade association for the industry. Luckily, most lenders of payday loans are ethical and fair, and can be relied upon for their professionalism.