Pay Day Loans

Modes of payday loans

There exist two forms of payday advances: one that is transacted online and the other you can apply for in offices or stores. You need to provide the lender with details of your checking or saving account with essential direct deposit feature if you are applying for payday loan online. In stores or offices you will be paid the money requested once you present the lender with a check made out for the amount borrowed.

Cost of payday loans

You can avail the payday loan of an amount ranging from $100 to $1000. You usually pay a flat rate of fee that might range up to 25% of the loan amount. The maximum loan term is generally less than a month.

Upon approval, you will receive a loan amount not exceeding your take-home salary directly in your account. Arrangements are made in advance to have the amount borrowed, plus their fee, withdrawn on or around your next payday.

Who uses payday loan?

You may sometimes find it really difficult to maintain some urgent family expenses like paying off your phone bills, electric bills, house rent and medical bills. Poor or improper budget plan at the time of getting your paycheck generally result into these kinds of situations. Therefore, you need to take a payday loan in order to meet such urgent expenses.

The payday loan companies normally target the low income working people, military personnel, and others who have a little or no saving and live paycheck to paycheck. Most of the borrowers are not able to pay back the loan within time, and end up rolling over their loan and paying renewal fee many times. At the time of repaying they end up paying more fees than the original amount borrowed.

What is required to get payday loan?

To borrow a payday loan, one needs to show the personal identification and income proof. In practice, payday loan lenders do not bother about looking at your monthly expenses and capacity to repay the loan. Typically you are required to meet the following basic criteria to get payday loan from payday loan lenders:

? You must have a job or there should be a regular source of income.
? You should have a Checking A/c in a bank.
? You should be at least 18 years of age.
? You should be a US citizen.
? Your monthly income should be at least $1000 Per Month.

How much a payday loan cost?

For a two-week payday loan, a borrower is supposed to pay at least fifteen dollars for every $100 borrowed. But with such a short period these loan fees are equal to roughly a 400% annual percentage rate (APR). And as the chart below shows, consumers who renew their loans often end up paying more in fees than they have borrowed!

For borrowers who are in the habit of repeating their loan five, ten, or even twenty times per year, payday lending turns out to be as chronic debt, instead of helpful credit. These borrowers have to pay extra loan fees for each renewal and that too for no new money.

The cost to the society is also very severe. The borrower has to get his loan renewed every two weeks while falling behind on other bills, like rent, mortgage, electricity, and even groceries since the payday lender is holding a "live check" as collateral.

The borrowers fall deeper and deeper into hitch, payday lenders get paid while other merchants and lenders do not. Social service agencies and faith-based groups pick up the tab for families in trouble.