Last Updated on May 20, 2021 by MoneyVisual
If you want to borrow money, there are different ways of doing it. You can choose a conventional loan from a bank or credit union. If you were looking for a short term loan for a period of 2 to 4 weeks, then the best option is to go for a payday loan. When you are in urgent need of money, where the sum involved is small and the duration short, a payday loan is the best option.
The reasons are that conventional bank loans are given for longer durations. The process is cumbersome with a lot of paperwork and it takes a lot of time. It is not a suitable option if you need a quick loan. For this kind of a situation, a payday loan is the best option.
The following is information about payday loans, how you can avail of it and most importantly what are the conditions to borrow money through a payday loan.
The Concept of Payday Loans
Every year nearly 12 million Americans take payday loans. This shows how popular this concept is. A payday loan is a loan amount of a small amount (usually $100 to $1000) that is taken for a period of two to four weeks or a little more. As the name suggests, the loan is linked to payday. When a person runs out of money and needs money, a payday loan helps them get this money easily and quickly.
The loan is given based on the job of the employee and the pay he/she earns. The concept involved is that the employee would repay the loan with interest by the next payday. This is why these loans are given easily. The lender is assured that he will get the amount loaned and interest by the next payday. The entire borrowing is related to payday.
If you want to obtain a payday loan, then you need to know the conditions that include eligibility to get the loan and other related information. The following is the information:
- You must be a US citizen to avail of the loan.
- You must be at least 18 years of age.
- Since this loan is related to payday, you must be employed and working for an organization full time where you get a fixed monthly payment.
- Most lenders insist that you must be working at the company for a minimum of three months. This is for them to be assured that you will get the next month’s pay.
- Your monthly income must be a minimum of $1000. Those earning less than that may find it difficult getting a loan approved or may get a loan for a very small amount.
- You must have a bank account and must provide the account details. Once your loan is approved, the amount will be directly credited to your bank account by the lender.
- The amount that you can borrow usually ranges from $100 to $1000. Loans lesser than $100 are considered too less and not worth lending. Loans more than $1000 increase the risk for the lender and may be sanctioned only if the lender has a higher pay.
- The interest rate varies and depends on the state and the lender. In general, the Annual Percentage Rate (APR) is around 40%. The interest has to be paid along with the amount borrowed by the next payday.
- Usually, the term of the payday loan is 14 days. The borrower should repay the loan by the end of 14 days.
- There is no credit score verification nor is any collateral taken to sanction the loan.
- Failure to repay the loan can lead to the borrower facing a case in small claims court.
- You may be asked to give a postdated check for the repayment of the loan.
- You may be asked to give an authorization for direct debit of your account for repayment of the loan. What this means is that after 14 days, you would have received your payment in your bank account. The amount will be directly debited by the lender from your account.
Getting the Loan
You can get a loan easily and quickly by contacting a payday locker. This is an agency that helps connect lenders and borrowers. The application can be filled online and the payday locker firm would forward the application to lenders in their network. These lenders would go through the application and approve the loan. In some cases, lenders may ask for additional information. A contract has to be signed once the loan is approved.
Once the formalities are complete, the loan amount is directly credited to your bank account. This is a loan that is obtained very easily from the comfort of your home. Loan approval can be done within 24 hours making it a very convenient borrowing option for those who need money.
My name is Harold Mitchell, I’m part of the editorial team at the Payday Locker. We offer Online Payday Loans in Michigan. Payday locker is a third-party agent that helps you connect with a lender and get money instantly.