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Payday Loan

Payday loans are also known as paycheck advances or payday advances. Payday loans are small and short term loans are borrowed for the purposed of covering up the borrower’s expenses until the next payday. The process of taking a payday loan can either be retail lending or internet lending. For retail lending, borrower’s need to visit a payday lending store to secure a small and short term loan. This loan is due on the next payday check, usually two-week time in the United States, and needs to be paid in full. Finance charges on payday loans usually range from 15 percent to a maximum of 30 percent for the two-week period. A post dated check might be issued by the borrower to the lending company. On the maturity date, the borrower is expected to return to the lending company to pay the amount he borrowed personally. Incase the person does not return to pay the amount the lender can process the check the traditional way or may electronically withdraw the amount from the borrower’s checking account.

If the checking account of the borrower has insufficient funds to pay the loan, then he will be facing consequences with the bouncing check. Banks usually put additional fees for people who offer banking checks, and payday loans may also incur additional interest rates as a punishment for not being able to pay the loan in time for the maturity date. Lending companies who are members of the national trade association are required to extend the payment plan for borrowers who were not able to pay on time. This extended payment plan has no additional costs. In other states, like Washington, the state law requires extended payment plans without additional fees.

Different lending companies have different criteria or requirements to assess whether you can get a payday loan or not. Usually they will ask for recent pay stubs to prove that you have a source of income. Bank statements are sometimes required by some lending companies.

Internet lending companies who offer payday loans market themselves through referrals, online searches, paid ads and emails. There are online application forms which can be filled up or faxes an application form containing personal information as well as bank information and social security number. Employer’s information may also be required to prove the borrowers source of income. Once the loan is approved, the loan is then directly deposited to the checking account of the consumer. The payment for the loan, as well as the finance charge will then be withdrawn from the borrower’s account on the next payment by the lender electronically.