Emergency expenses are inevitable. Everyone, at one point or another, has been a victim of this sudden need for cash to pay for bills or fees that cannot wait until the next payday. To solve this, a lot of people take out loans or cash advances from financial institutions, banks, or even friends and family. Most of the lenders are not very accommodating in that they require a lot of certificates and documents to prove you’re capable of paying. Banks, for instance, demand so many records from you and yet they themselves take such a long time in releasing the loan. On the other hand, there are lenders who are lenient and practice good faith when it comes to assessing the borrower. One example of this would be payday loans.
What is an online payday loan?
With a typical duration of 14 days, an online payday loan, more popularly known as a payday advance, is basically an online short term loan that is given to a borrower who needs cash in between pay days. The interest rates range between 10-40%, which means if you take out a loan worth $100 today, you should be paying back anywhere between $110-140 within the next couple of weeks. This is an absolutely perfect way to pay off emergency expenses and for other urgent situations.
Requirements
For availing of an online payday loan in the US, the borrower is required to present one or more recent pay slip or a certificate of employment because either would prove that he currently has a steady source of income. Also, the borrower needs to bring bank statements or passbooks that indicate he is an existing depositor of a bank. This is vital because most lenders demand that the loan and the payment should be done through bank transactions. Since the abovementioned requirements cannot be presented physically online, most lenders expect faxed copies instead.
Though all legitimate lenders are governed in accordance with the Federal Truth in Lending Act, some companies and institutions have their own underwriting criteria. This means some may demand more requirements from the borrower before releasing their online payday loans.
Payment terms
If the loan is taken out at an office, center, or a stall in the mall, the borrower is required to provide a postdated check for the full amount plus the interest fee agreed upon in the contract. This setup can be quite a hassle for some people, which is why people prefer to take out payday advances online instead, as payments are done through electronic transfer from a borrower’s payroll account to the lender’s bank account.
In the event the lender is not able to repay the loan due to insufficient funds or mere negligence, the borrower is required to pay a “bounced check” fee. Apart from this, a higher rate of interest is attached to the unpaid principal. This can be too costly if not paid on time. In fact, some interest in loans can reach up to 100% of the principal in just a few weeks.
Before taking out online payday loans, make sure you would be able to pay when the time comes. This type of loan may be quick and convenient, but it can be really dangerous to your finances when managed incorrectly.
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