Payday loans are an effective solution to handle short term money problems, provided that you’re a responsible adult with a steady job. There’s no need to worry about your credit history. It’s a fast way to get a loan that works as long as you pay the loan off on time. These loans are designed to help individuals between paychecks. Here are some important facts to keep in mind about payday loans.
Benefits of a Payday Loan
- The money can be used for anything
- No credit check
- Bad credit does not disqualify you from the loan
- The application process is fast and simple
- No one else has to know about the loan
- It typically does not affect your credit report
- No hidden fees
Reasons for Turning to a Payday Loan
Some of the top reasons consumers seek payday loans is to pay for unexpected scenarios such as medical or auto repair bills. But payday loans can be used for more than just emergencies. You can use them during the holiday season or throughout the year to buy gifts for other people. You can even use them to pay for your own vacations and entertainment choices. Some students use these loans to pay for tuition fees and books while entrepreneurs use them for business startup costs.
Many people need payday loans simply because they do not have a big enough savings account to pay for unforeseen or desired expenses. Instead of bothering friends and relatives, you can save yourself from the misfortunes of possible embarrassment or suspicion that can ruin even close relationships. You can also avoid the painful process of possibly being rejected by a bank due to poor credit history. In such cases, a bank loan rejection can have further adverse effects on your credit score.
Almost everyone is eligible for a payday loan as long as you are at least 18 years of age and have a job that pays a certain amount, depending on the lender. In the UK the threshold is £750 per month while in America it’s closer to $1000 per month. You will also need a bank account and a valid debit card.
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Most payday loans allow you to apply online and the approval process usually takes less than 24 hours. Sometimes it only takes a matter of minutes. The application is simple in which you fill out basic contact information, banking and employment details.
You will be contacted through email regarding your loan approval, the loan amount, the interest amount, the repayment date and other details. If you are happy with the terms, then you can sign the application online and the money will be sent to your bank account. There are no upfront fees.
How Much Can You Borrow?
In general, the amount you can borrow depends on how much money you earn. The more you make, the more you can borrow. As a rule of thumb, only request an amount of money that you are certain can be repaid in a few weeks.
Interest Rates and APR
At first glance the annual percentage rate (APR) for interest on a payday loan may appear to be high. But you need to keep in mind that this rate is calculated as if you were paying the loan back in a year. If all goes well, you will only be borrowing the money for a few weeks, which means you will not be paying as much interest as the APR implies. That’s why it’s best to pay the loan off as soon as possible.
The repayment date will likely be the date of your next payday, which explains the name payday loans. The money, which includes the interest payment, will be electronically debited from your bank account. If you are unable to repay the loan on the repayment date, you can extend the loan by contacting your lender. This extension may involve a higher interest rate with additional fees.
The key to making a payday loan work for you is to only borrow the money if you know you can pay it back on time. As long as you meet your obligations it can help fix your financial situation.