What is a payday loan and how does it differ from
other types of loans? This is a very important question, and one
that should be well understood before you take an advance on your
paycheck.
A payday loan is a short term, high interest loan that an individual can access using their future paycheck as collateral. When accessing any type of loan, whether it be a home loan, car loan, or others, the lending institution will assess your ability to pay off the loan in determining whether you're eligible to borrow the money in the first place, and the amount of money you can borrow based on your ability to pay it back. A payday loan is no different.
Your eligibility to access a loan against your paycheck depends entirely on your paycheck, and in effect, your employment. This is why those companies offering advances on pay assess the length of time you've held your present job, and the income generated from that job. Many loan companies will not qualify you for a payday cash advance unless you make over $1000 monthly, and have held your current job for at least 3 months.
Companies that offer individuals a pay day advance typically require their clients to agreed to direct deposit and withdrawal from their bank account. For this reason, most companies require their clients to have a checking or savings account. Many companies require proof that the bank account has been active for at least three months.
Reputable lenders providing cash advances on paychecks are authorized to use the Federal Reserve Wire System, and as a result, must abide by the NACHA (National Automated Clearing House) rules and regulations.
Who provides short term loans based on paychecks?
There are many companies in existence today, both on the Internet and in almost every state and city, that provide quick cash to those in need. Instant cash loans are becoming a lucrative industry in America today, and companies providing fast cash advances stand to make significant profits.
How do they make their money? Lending companies that provide instant cash loans demand high fees for the service and convenience they offer. A paycheck loan is a very high interest loan, and requires an individual to pay a high fee for the convenience. Generally, the fee required to access the quick cash is approximately $25 per $100 borrowed. Then, the interest, referred to as A.P.R. (annualized percentage rate), can range from 300% to as high as 1400%. In addition, if the borrower chooses to extend their payback period, additional fees apply. The bottom line is that this is VERY expensive money. Learn more about no fax payday loans online.
Payday Loans Resources:
Report violations of the NACHA - Electronic Payment Association rules. Read advice from the FTC (Federal Trade Commission) about payday loans.
