Payday advance offices are available in every city and large town. They can be an invaluable lifesaver if you get caught short between paychecks. However, you should be aware of the negative aspects, as well as the positive.
Basic Requirements for Payday Loans
The requirements are pretty basic: most payday loan organizations require that you have a regular paycheck and a checking account. Most require that you apply in person. On the initial visit, you are usually required to bring your last several paystubs, your last several bank statements, a blank check and photo identification. If all or part of your income is in the form of direct-deposited checks, such as Social Security, disability, etc., this will be reflected on the bank statements that you provide
Loan Amounts and Application Process
payday loans online vary by city and region of the country, with $500 to $600 being the norm. Once you have provided the necessary paperwork, your application is usually put through immediately. Most paycheck companies do not perform credit checks. The blank check that you furnish will be filled in with the date the payment is due and the amount due, and you will be asked to sign it. This is their guarantee of repayment. In the event you do not repay the loan, and the check you have furnished is returned for insufficient funds, there is a penalty from the payroll company, as well as the severe legal consequences of passing a worthless check.
Loan Duration and Repayment Terms
The length of the loan also varies, depending on your pay schedule and the individual payroll loan company. If you just need a quick loan until your next paycheck, then you can repay the loan in a week or less. If you are paid bi-weekly or monthly, your due date will usually be the date you are paid.
High Interest Rates of Payday Loans
As to the negative aspects of this type of loan, the interest rate is much, much higher than a regular loan from a bank. On a one week loan, the interest rate can exceed 800%; on a two week loan, it can exceed $400%. Leveled out over a month, it can still be higher than 200%. The pay-back amount may not seem that high in figures because the loans are relatively small. For example, if you borrow $500.00 for two weeks, your repayment amount would be an average amount of $575, which is nearly 400%. The $75.00 in interest doesn’t sound that bad, until you compute the interest rate.
Why Payday Loans Can Be a Lifesaver
Nevertheless, in these extremely difficult economic times, payday loans can be a true lifesaver. They keep the phones and power on, ensure the water keeps running, provide food until payday, and even help cover the rent to keep you in your home.
The bottom line about payday loans is that while they are a poor financial move, they can also mean the difference between keeping afloat and going under.