How Do Payday Loans Work 

Payday loans are short term loans or cash advance loans. Many people take this loan to fix their financial issues. It is a loan where you borrow money against your upcoming pay. The amount is generally small as it is not for a long term solution. The concept of the loan is growing in popularity. More and more people are taking advantage of this form of borrowing. The loan can also be applied online.

Requirements

Payday loans are easy to apply. The application is usually made online or by visiting a payday shop. The process for obtaining a loan is fast and straightforward if the applicant has a permanent job, a bank account that handles electronic money transfers, and identification. Usually, lenders do not check the credit as they are more interested and can collect the borrowed amount. As the application is processed, approval and review are at the same time, and money is deposited directly into the borrower’s bank account, usually on the same day.

Direct debit facilities are used by some payday lenders to give them greater control over the repayment of the short term loans. Alternatively, the borrower will offer a postdated check to the lender to cover the eventual refund of the money borrowed plus interest. Some lenders also give long term payday loans with long installments. They are authorized to withdraw payments due on each pay date form the borrower’s account.

No Credit Check

Before giving any loans, the bank checks the credit of the customer. It is an approach to check whether you will be able to repay the loan amount. But with payday loans, this is not the case. There is no requirement for a credit score. Bank account, id proof, and proof of income are all you need. If these requirements meet, then there’s no stopping to get the payday loan. One of the primary reasons why financially unstable people prefer this loan.

Repayment

You don’t have to show up to pay the repayment amount. When you borrow a payday loan, you sign an agreement where the lender is authorized to receive the repayment amount on the due date. The lender can cash the check or withdraw the amount from your account according to his convenience.

Renewal

There may be situations when you will have difficulty in repaying the loan amount on the due date. If so, then you can renew the repayment by paying the same interest and get two weeks to tie to pay back the loan amount. You can also take another payday loan and repay the old one. It is another way of renewing the loan.

Quick Stats

Highest AmountLifeLoans - $40,000

Loan Terms up toQuickLoanLink - 7 years

Recommended income$2,000+ per month

Grace Chen
Article written by

Grace Chen

Grace Chen has 10 years of experience in the financial field and have been delivering excellent business content through her articles.

Grace graduated from the Haas School of Business, University of California and is currently the chief editor of Communicate Better where she has written and edited thousands of articles published in various media.