Have you ever been in a tough financial spot and needed a loan until your next payday? It happens to many working Americans because of unexpected financial needs. Which payday lender do you turn to? When you know how payday loans work, you find the companies that work best for your situation. You also avoid the disreputable lenders when you know the norms.
What Is a Payday Loan?
A payday loan is considered a short-term, higher annual percentage rate (APR) loan that is most often less than $500 and due within two weeks or a month, depending on your pay date. Payday lenders either operate as a storefront or online lender based on state law. There are specific features one should expect from payday loans including the amount you will borrow, a quick repayment schedule of two weeks (four weeks for government-issued incomes), cash or electronic deposit of funds and a signed check or electronic withdrawal authorization to secure your repayment.
Some states allow lenders to renew or rollover loans, which allow borrowers to repay the fees rather than the full amount of the loan. The fee schedule will also vary between lenders, which range from 10 percent to 30 percent on every $100 borrowed. The APR is also calculated by credit institutions based on the loan amount and repayment schedule. A short-term lender divides the finance charge by the amount of the loan and multiplies the answer by a year and then divides it again by the number of the loan days, which is why the APR seems high. Credit institutions charge 12 percent to 30 percent each month, and the balance accrual is long-term.
How Do Payday Loans Work?
When a person needs fast money, a payday lender is typically the quickest way to get it at a store or an online lending site. You fill out an application and supply the company with financial documents and authorization forms. A representative verifies the documents and income and then make a determination based on one’s ability to repay the loan within a short loan period.
Steps for a Storefront Payday Loan
Here is how you can get the payday loans you need.
Fill out an application form
Provide original bank statements, employment data, and address verification
Write a check for the loan plus the fee and receive cash
Come back in two weeks to pick it up or have the lender run it through the bank
Steps for an Online Payday Loan
Here is how to get payday loans easily and quickly.
Fill out a digital application
Either submit documents when requested or provide information for verification
Receive money by bank deposit or bank card
Sign an authorization form for electronic withdrawal of payment
Online payday loans in Idaho cap the loan at $1,000 or 25 percent of income, no APR and term oversight, allows three rollovers and has a 60-day repayment plan
Payday lenders offer these payday loans to consumers who have financial hardships and need fast access to money and lack the infrastructure to apply for traditional loans. It is also convenient for people who do not need a large amount of cash and will have access to funds to repay it.