As the name suggests, the payday loan needs to be repaid from your following months’ paycheck. It is a few weeks’ loans, which helps to cover instant cash needs until your next salary. As these are generally due within 15 to 20 days or close to the next payday, the interest is very high. Its annual percentage rate is in triple digits. If you are not cautious in repaying, the loan can cost you significantly. Therefore before you apply, it is sensible to learn what you get and what the cost is.
How payday loan work?
Online payday loans work differently than other kinds of credits. The laws associated with how much can be borrowed or interest charged differs from one state to another. Some states have banned payday loans.
After you submit an online application form, the lender will review and approve it. Funds will be transferred in your bank account or you can personally visit the local lender’s office and receive a check or cash. The loan has to be paid in full along with the interest-based on the approved amount.
Reasons payday loan is popular
- There may be no other financing option, so some people choose payday loans. It may be due to poor credit, which prevents them from accessing personal loans with good terms.
- Lack of knowledge or concerns about alternatives is another reason. For example, you may not be at ease to ask a friend or family member for help.
- Payday loans are appealing as they can be got easily with a few basic requirements for approval. Only a steady paycheck [means good job status], ID and bank account information is needed.
How to repay the payday loan?
Depending on lenders, you get some options for debt repayment.
- Postdated check, while applying
- Via online using lender’s website
- Check transfer on next payday
On the due date, the lender will electronically withdraw funds from your bank account. Some lenders offer rollover or renewal of existing loans or due to roll over in a new loan. This means you will have to repay huge fees if the cycle continues.