Payday Cash Advance – Short-Term Financial Solutions
Payday lending is in the category of short-term funding that does not require collateral. Other terms associated with this loan are a payday advance loan, salary loan, cash advance loan or small-dollar loan. Lending goodwill stems from a borrower’s state of being employed plus you need to show proof through payroll records.
Upon approval, the lender deposits money into your account in a matter of hours. Others take up to 72 hours to complete the process. Regardless of the difference in turnaround time, payday advance loans are some of the most suitable debt instruments.
Payday borrowing comes in handy during that time of the month when you hit a snag financially. In other words, you need money urgently, but payday is a week or two away.
The convenience afforded by these loans is such that you can meet expenses that crop up unexpectedly. Moreover, you can use the money to pay your bills on time and avoid fees and penalties from your bank.
As you will shortly realize, completing an application for a cash advance is something that you can do from home. It only takes a few minutes, and after that, you can have the money by the next business day. Some lenders may even deposit the funds into your bank account within a few hours of approval.
Fast approval plus convenience
Online loans have the advantage of a quick cash loan application, authorization, and receipt of cash. With online applications, all you need to do is to search the internet for lenders. Unlike brick and mortar lenders, the virtual ones are easy to find plus you can quickly compare their rates.
An added advantage is that you can apply for these loans from the comfort of your desk at home or your place of work. However, there are some requirements before you qualify for an online credit facility.
You must have been in your current employment for at least three months, operating a checking account for the same duration and have a minimum take-home pay of $800 net of taxes.
You need to have a salary, checking account too
Having a salary is the primary requirement for you to access payday lending. You also need a bank account that enables you to draw a cheque in the lender’s favor. Without these two requirements, you cannot access a payday advance loan. One may deem these loans unfair as they only favor salaried people. However, when you consider the nature of the debt, you will understand why.
Unlike other obligations where you provide collateral, a payday advance loan is different. The only assurance is your next pay. Also, your salary is not a single aspect under scrutiny. The lender needs to be satisfied that what you earn is decent enough to repay what you have borrowed.
Honesty goes a long way
Payday lenders will also ask for your most recent paycheck stub plus a statement from the bank. Unlike other lenders, they do not ask for reports from the credit bureau. However, online lenders do partner with consumer information service providers to verify information such as your bank account status, non-sufficient fund instances and charges, credit card payments, and outstanding loans.
To avoid a decline of your request, you must ensure that you answer all questions correctly and truthfully. It is also crucial that you desist from applying for multiple loans at a time.
Poor credit history
Are you worried that with a bad credit score, you may not secure cash for emergencies? Not anymore since payday advance loans fill this gap for borrowers who would otherwise go to loan sharks, their exorbitant rates, and penalties. Unlike banks where they will require you to give reasons why you need the money, no one will ask you to justify a payday loan.
No law under the Consumer Financial Protection Bureau or other pieces of legislation state that you should explain your borrowing. You can spend the money on a wedding, your child’s school excursion or pay for a vacation. If under any circumstance you cannot return what you owe on the next payday, you can roll your loan over to the subsequent month.
Cost of debt at a glance
Despite the benefits you can derive from a payday loan, the cost of borrowing is high. Your debt comes at a price which is the lender’s fee. These guys also need to make a profit, that is why they are in the business of lending money.
The calculation of that fee takes the form of an annual percentage rate (also abbreviated as APR). In a nutshell, APR measures the cost of borrowing be it a credit card, payday loan or mortgage. The rate applies annually and is a percentage of the amount sought. A hypothetical example will help you understand the calculations better.
APR calculation simplified
Assume that you have borrowed a $400 payday loan. Further, say, the lender has applied a $50 fee and expects your payment in the next 14 days. To compute APR, you first divide the charge by the amount advanced. After obtaining your result, multiply it by 365 being the number of days in a year. Divide the answer obtained by 14 days representing the term. After that, take the result of your computation and divide it by 100.
- 50 divided by 400 yields 0.125
- Multiplying 0.125 by 365 days gives you 45.625
- Dividing 45.625 by 14 equals 3.2589
- Multiply 3.2589, and you get 325.89 percent which is your APR
Payday borrowing, if not carefully handled, can entangle you in a web of endless debt possibly needing consolidation. You can avoid obtaining unreasonably expensive loans by using only those lenders licensed by the Department of Business Oversight. Dealing with unlicensed lenders exposes you to costly fees. Besides, you will have little or no legal reprieve in case of complaints. State law protects consumers by placing limits on the amount you can borrow as well as the fees lenders can reasonably charge. Besides, the DBO requires that registered lenders keep their clients informed about the loans they intend to acquire.
Protecting borrowers in California
For instance, under California State Law, the maximum amount one can borrow is $300 while the highest fee is 15 percent. Your prospective lender is under obligation to tell you the APR. Also, a payday loan in California should not go beyond 31 days.
If unable to repay, you are eligible for an extension at no additional cost. If you issue a check and the bank fails to honor it, your lender can charge you up to $15 and nothing more. Lenders in California cannot accept collateral on payday advances. At the same time, no one should coerce you into buying another financial product so that you obtain a loan.
Consumer protection beyond California
The Community Financial Services Association of America is another consumer protection body whose membership does not restrict itself to California alone. The organization represents lender members drawn from over 30 states in the USA who collectively serve over 19 million households with credit and a wide array of other services.
A payday advance is a convenient and fast way to get money before you get your next paycheck. Lenders need to see proof of employment and banking details. You can secure the loan even if with a poor credit rating. Each debt comes at a cost, and you have a right to know what a lender charges. Consumer bodies exist to protect your interests.