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What are Payday Loans?
Payday loans, sometimes referred to as payday advances, are short-term, unsecured loans, usually for small amounts. The only collateral usually required to apply for these specific loans is some sort of employment record, such as pay stubs, although payday loan has become a shorthand for any type of small, short-term loan, regardless of technical term. Not financially supported Direct reliance on the borrower’s next paycheck. Payday advances, like any loan vehicle, are heavily regulated. These rules vary widely from state to state in the United States and from country to country internationally.
Payday Loans Are a Thriving Business
Payday lenders have seen exponentially growing success around the world, and attribute that success to providing a service that was not available before. They point out that emergency cash loans offer an attractive option for those who are not able or willing to use less expensive traditional routes to borrow money. Some of the companies offering emergency cash advances in the UK describe their approach as an easy financial service for young, web-savvy borrowers who are accustomed to the ease and convenience of instant online communication. These applicants often feel left out of the traditional banking system. Today’s modern consumer, who is heavily engaged with social media, can also apply for these micro loans using their smartphones, with money being transferred to the successful applicant’s bank accounts within minutes.
Compare Payday Loans with other types of loans
Many types of short-term loans can seem expensive when the fees associated with the loan are factored into the annual APR. For this reason, payday lenders like to compare their loan products to bank overdraft fees and other fees used by traditional lenders to collect funds. Many payday lenders don’t even disguise their business as banks, simply as another form of Internet technology, used to connect willing borrowers with willing lenders.
Payday loans are available 24/7
As traditional outlets for credit become harder to find and larger and larger amounts of paperwork are required for even small loans, payday advances have stepped in to fill the void. They are available day and night, seven days a week, and in many cases the process is so completely automated that the loan is granted without the borrower ever having to speak to another person. After applicants have established a track record of successfully paying back cash advance loans, some lenders simply require applicants to text the desired loan amount and desired loan term, and the money is immediately available.
So why should I pay extra interest?
Sometimes it’s an unexpected emergency, or it could be that an opportunity has come up that you just can’t possibly pass up. Is this a ticket to the playoffs? Have any friends got access to ringside seats at the “Fight of the Century”? Or maybe you’ve committed the unforgivable sin of forgetting your significant others’ birthdays…
Whatever the reason, you are short of cash. If you do not have a credit card, your friends and family may not be in a position to help you. What do you do?
It is common for people in urgent financial need to approach a short-term lending company for a “payday loan”. These loans are often unsecured, meaning the borrower does not have any collateral to provide. This makes the loan a high risk cash advance for the lending company. If the borrower posts the collateral, there is nothing of value to collect. They compensate for the increased risk by charging very high interest rates.
The applicant usually needs to provide proof of employment and a government-issued identity card. The idea is that when the applicant’s next pay check is issued, the money will be used to pay off the loan. In some cases, the loan may be extended to the borrower to purchase a car or other large-value item. In these cases, there is somewhat less risk for the lender. The item can be repossessed if the applicant fails to repay the loan as promised.
so what’s the bottom line
Companies around the world provide payday loan services, including Canada, the United States, Australia and Great Britain. The limits on how much interest may be charged, and the amount of the loan, vary depending on the country, state, province or county where the payday loan company is located.
The industry is growing; Probably fastest in the UK, where there are fewer regulations on how payday loan companies can operate. UK firms have expanded into Canada and Australia. In some states in the United States, extremely high-interest loans (such as those provided by payday loan advance firms) are illegal.
On the spot check-cashing is another service often offered by pay day advance companies. Perhaps the customer doesn’t have a bank account or wants immediate access to cash. A flat fee or a percentage of the check amount will be charged as fee. Short term loan companies often open early and close late to take advantage of those who need immediate access to cash.
Many companies now offer online applications for payday loans. They typically offer quick decisions on a customer’s application, sometimes within an hour. Cash can be deposited into the bank account or can be collected by the borrower at the company’s office.
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