What Are Pay Day Loans?

Life happens to everyone. There are sometimes situations in which expenses pop up that you are not prepared to pay. An unexpected car repair, a medical bill or an urgent need to move may cause undue financial hardship. Payday loans are available to help you to make ends meet until your next paycheck. These loans are often available to people of all credit profiles and can usually be obtained quickly.

What is a Payday Loan?

A pay day loan, or pay check loan, as the name suggests, is a loan granted to a borrower until the next payday. When a borrower signs up for a payday loan, they are agreeing to repay the money, with interest, on the next payday. Borrowers who take out payday loans are granted these loans based on their credit profile and anticipated paycheck.

Payday Loans vs. Bank Loans

Unlike a bank loan, people who are looking to borrow money for a payday loan do not have to offer collateral to secure the loan. For a bank loan, borrowers often have to hand over the title to their cars or deed to their homes in order to secure the loan. In addition, banks may require higher credit scores in order to grant even small loans. Pay day lenders may review credit scores but don’t use them as a disqualifying factor when deciding to grant a loan. Even consumers with poor or no credit histories will find it easy to get a pay day loan quickly.

How Payday Loans Work

The first step in the payday loan process is to fill out an application with the desired amount of the loan. From there, the lender will verify the source of the income. Many lenders do not conduct any credit checks when deciding to grant a loan. Some storefront pay day loan shops have their own in house underwriters who can grant loans on the spot.

After being approved for the loan, the borrower writes a post dated check to cover the amount of the loan plus interest fees. On the maturity date of the loan(the date when the loan is due), the borrower is required to repay this amount. If the borrower wishes to extend the loan for another pay period, he can do so at the maturity date.

Interest rates on pay day loans are higher than those of traditional bank loans, but can save the borrower money in overdraft fees and credit card advances.

There are many ways to secure a pay day loan. There are many lenders who offer pay day loan services online. These lenders offer websites with a quick and easy application process. Within a few hours, borrowers can receive an approval and enjoy money in their checking accounts.

With payday loans, there is no collateral needed for these short term, unsecured loans. There are often occasions in life when financial needs exceed available funds. With pay day loans, borrowers can get the money they need to make it to pay day.