Payday loans can go by a variety of different names such as a payday advance, payroll loan, or cash advance loan. The official definition of a payday loan is a loan that is given usually in a small amount that is between 500 to 1,000 dollars. The loan is usually short-term and unsecured. In order for individuals to receive a payday loan there are certain qualifications that they have to meet. These qualifications are very simple and they are a previous payroll or employment record and usually a bank account. The laws that govern a payday loan differs in each country, state, and federal system.
The Inner Workings Of A Payday Loan
There are things about payday loans that individuals should know when they are considering getting one. The number one thing is that some people consider these loans to be predatory because they charge individuals high interest rates and often have hidden fees within the contract. A payday loan is also short-term and is often given based off of a portion of an individual’s paycheck. Individuals can get a payday loan from a physical location or an online lending institution. An example of a physical location is a check cashing business such an example of an online lending institution.
How To Obtain A Payday Loan
When an individual wants to get aт online loans same day or at a physical location there is usually an application process that is used to see if the individual is approved for the loan. The individual needs to provide other information along with a completed loan application. The other information that is needed is usually check stubs for the last 2 to 3 pay periods and also a current and good standing checking or savings account. In some cases but not many the lending institution may check the individual’s credit score or credit history before approving them for the payday loan. The lending institution whether a physical location or online does not ask for any collateral because the portion of the individuals wages is the actual collateral. The lending institution will also get a debit card or check on file just in case the individual does not come in to make a payment on the loan. This will also affect the lending institution to be able to automatically deduct payment from the individual’s bank account.
How Interest Rates Are Determined On A Payday Loan
When an individual receives a payday loan the regulated limit of interest that they can charge is usually less than 35 percent. There are some cases where the lending companies can charge higher interest rates because of the various loopholes that payday lending companies find in the law. The interest rate also depends on the state because each state individually regulates its payday lending laws. This is why it is important that each lendee be aware of the exact interest rate that the company is going to charge before getting the loan. Lastly online lending companies charge much higher rates then the physical lending locations.