Imagine you are in a situation where you have spent every single penny of your salary and the date of your next paycheck is nowhere near. Suddenly an emergency related to your health or your loved one’s health comes up and you are left with no money to pay for the treatment. In such drastic times, the only thing you can do is give yourself a good scolding for not keeping a few savings for times like these.
This is where the role of payday loan comes in. It is a short term loan that is designed for people who are low on cash and cannot utilize their credit cards due to bad credit history. It comes in handy when you need fast cash to get through a difficult situation as it requires no extra documentation or long loan lending procedures.
Before you decide and go on to apply for a payday loan, you must be well acquainted with the functioning and processing of this service and how to go about it. In this article, we will look at different aspects of a payday loan and how one can apply for it online.
What is a payday loan?
To give you relief during times when you are left with zero balance in your wallet, a payday loan is a service designed to provide short term loans. It works as a cash advancement but once your paycheck is received, you have to pay it back. As an unsecured and short-term loan, it requires no collateral and it is typically paid within four weeks.
The amount of loan is short, usually not exceeding 500 dollars depending on the policy of the lender. It is basically designed to provide a limited amount of cash, based on the loanee’s income, to tide them over until their next payday.
This quick and easy excess to the cash comes with many of its perks but it also comes with a price later. The average interest rates or the finance charge is quite high and varies from 15% to 20% and even higher, depending on the lender.
But the instant solution it provides with its fast cash service and hassle-free processing makes it worth the price that has to be paid later. Because in times of cash emergencies, all one thinks about is how to arrange funds quickly without any complications, and that is just what payday loan offers.
How is online payday loan different from a regular payday loan?
There are two ways to get a payday loan, online or writing a cheque to the lender. In order to apply for the loan online, there are a few simple steps that have to be followed on the lender’s website. Upon completing these steps, the requested loan amount is directly deposited to the bank account once the application gets accepted.
In the second method of getting the loan, you have to visit the bank or lender offering the loan and write a cheque of the loan amount you have borrowed, this amount also includes the processing fee. The cheque is then left with the lender so that they can cash it when your next paycheck is received.
The difference between online and regular payday loan is only in the process of applying for the loan, the other functioning is exactly the same. The online method is however easy and can be quickly accessed during a cash emergency.
What makes a payday loan different from other loans?
There are a few aspects that draw several differences between a payday loan and other loans. Firstly, the payday loan is given to people based on their income and do not look at the credit history of the borrower. So if you have a bad credit rating and in dire need of cash, you can still benefit from this facility.
Secondly, a payday loan is typically advanced by payday lenders and other financial companies. Thirdly, the cash is given to the loanee without any assets or collateral backing it. Moreover, a payday loan typically covers a small amount, therefore, they only provide a little amount of cash which is usually required to be paid back within a month or until your next paycheck arrives.
Lastly, payday loan includes higher interest rates than most other credit types. Therefore, it is advisable to pay it off faster in order to avoid the accumulation of interest amount.
Who can apply for a payday loan?
Individuals applying for the payday loan are assessed based on certain eligibility criteria that are set by the lender. The basic principle of designing eligibility criteria is to protect such individuals who are at risk of financial complexities and cannot pay back the loan.
According to these criteria, those can apply for the payday loan are as follows:
- Individuals who are 18 years old or above so that lenders can be fully assured that you are mature enough to understand your financial responsibility and can pay back the loan.
- Individuals who have a source of income that is regular so that you can pay back the loan when you receive your next pay.
- Individuals who are residents of a state that has legalized payday loans.
- Individuals with a valid ID, email address and phone number
- Individuals with an active bank account
The above-mentioned points account for the basic structure of the eligibility criteria upon which each lender sets its own policies. So it is wise to check policies of different payday loan lenders before applying for the loan.
Conclusion
We have seen what is a payday loan actually, what differentiates them from other common loan types, how one can apply for it, and who can apply for it. It is safe to say that now you have a pretty solid idea of this process and you must feel ready to apply. If that is the case then you can visit the Personal Money Network who comes among one of the best payday loan lenders.