Payday Loans And Cash Advances

Securing a small cash advance with payday loan has become popular with folks needing a quick no hassle short-term loan to cover expenses until their next payday. Payday loans are ideal for individuals who are short on cash between paychecks, do not have a personal line of credit such as a credit card, and have a poor credit history.

Keep in mind, payday loans are not financial management tools. This type of loan is often used to cover unexpected expenses such as car repairs, home repairs, and medical bills. The average payday loan is up to $1,500 with repayment due with in 14 days. Loan amounts, rates and terms vary by lender and are based on state regulations.

Often the fees associated with a payday loan are less expensive than those associated with a bounced check and a late payment fee. However, payday loans are considered high interest loans. The average fee for every $100 borrowed for 14 days is $15. If you rollover or extend the repayment of the loan for another 14 days, you will be charged an additional $15 even if you make a partial payment. Therefore you should only use payday loans to cover expenses you can easily pay with your next paycheck.

How do payday loans work?

With payday loans lenders do not review your credit history or require personal property as collateral. You only need to show that you can repay the loan. Payday lenders use your next paycheck or a government income source such as a social security check or disability check as collateral.

When applying for the loan you will need to show proof of employment or income, and have an active checking account. In some cases the lender may call your employer or government agency to verify your employment or income source. Depending on state regulations, the lender may also run an electronic check to see if you have other open payday loans—many states restrict the number of payday loans an individual can secure at one time. You also will be required to write a postdated check for the loan amount and loan fee, or to authorize a checking account debit for the amount owed. Once approved, the lender will deposit your loan into your checking account.

It is important to carefully read and understand the terms and conditions of your payday loan. Once you sign the agreement, you are obligated to pay all fees associated with the loan within the time frame agreed upon. Only borrow the amount of money you can easily afford to repay with your next paycheck. When payment is due, the lender will cash the postdated check or debit your checking account for the full amount.

To ensure you get the best rates and terms, investigate at least three services. Compare both storefront and online services. Look for lenders that have been in business at least a year or more, and who clearly state their rates and terms.

What is the difference between a payday loan and a traditional cash advance?

A payday loan differs from the traditional cash advance issued by a credit card or bank in three significant ways:

1. Payday loans do not consider your credit history. You only need to show proof that you can repay the loan. Credit cards and bank loans are only issued to individuals with a good credit history. Banks go even further by considering your debt to income ratio to determine your ability to pay back the loan, and may even require personal property as collateral.

2. Payday loans have a flat interest rate. The national average is $15 dollars for every $100 borrowed. If you qualify, credit card and banks base their interest rates on your credit history—the lower your credit score the higher the interest rate you pay. In addition, credit card cash advances have higher interest rates than traditional credit purchases, and bank loans often include origination fees.

3. Payday loans are short-term loans. The national average is 14 days to 30 days. Many states regulate how often you can rollover or extend repayment of the loan. Credit card cash advances have no limits; however, the longer you take to pay down the cash advance, the more interest you will pay. Banks on the other hand have payback terms that range from 15 months to 30 years, and often charge a early repayment penalty.

What is the advantage of online payday loans?

A growing number of reputable payday lenders offer online services. This allows you to easily apply for a loan from the comfort and privacy of your own home. Applying for a payday loan online requires you to complete a secure online form. In some cases you will need to fax copies of additional information such as a driver license, paycheck stub, and a bank statement in order to complete the application process. Once you submit the application you will receive a confirmation email that includes the terms of the loan. In many cases a representative from the lender may call you immediately to review your application and the loan terms. Depending on the time the form is submitted, the approval process may take one to two business days. After all required documents have been received and your information verified, you can expect to have your loan electronically deposited into your checking account within one business day after approval.

How do faxless payday loans work?

To expedite the approval process, many online payday lenders now offer a faxless loan application process. Applying for a faxless loan works the same way, only you are not required to fax copies of your driver license, paycheck stub, or bank statement. The lender will verify your information electronically and/or by calling your employer or income source. Once you submit the online form, you will receive a confirmation email, and a representative may contact you to review your application and loan terms. Depending on what time your application is submitted, approval occurs with in a few minutes to a few hours, and you can expect to have your loan electronically deposited into your checking account within one business day.