3 Reasons Why Online Payday Loans Are Common Among Borrowers
It’s not a lie that many middle-income Americans depend entirely on their paychecks. After paying off their bills, there’s usually very little left to put aside in an emergency fund. So when an unexpected emergency like a doctor’s bill, leaking roof or an overdue mortgage pops up, they are forced to borrow or sell off their belongings to cover the expenses.
Since many traditional banks cannot lend money on such short notice, many individuals turn to payday loans. Getting quick cash loans is easy, and borrowers don’t have to worry about their bad credit scores.
How online payday loans work
If you are dealing with a direct lender, you’ll fill out their loan application form, and once they approve your request, you’ll write a post-dated check for the loan amount you need, plus all the interest and associated charges. Deposit it with the lender, who will then credit your checking account with the funds quickly.
The lender will hold on to the check until you pay off the loan in full. The repayment period is usually two weeks or it can be extended to a few months depending on your agreement. You can repay the loan in person or the lender will simply cash in the check on your payday.
Why are payday loans online so common among borrowers?
When you are faced with an emergency, you don’t have the luxury of time. Most online payday lenders make it easy for you to receive funding within a few minutes after application. The application process is quite easy and approval time is almost instant.
You also don’t have to worry about the lengthy credit checks. Lenders will not base your eligibility for a loan from your credit history. They will base your capacity to pay off your loan on your monthly income. Lenders in most cases will check your income and give you a loan that you are comfortable paying back.
Borrowers don’t need collateral to get a cash advance. The post-dated check is enough security.
The major disadvantage of payday loans is the high interest charged. For every $100 cash advance, you will pay an interest of 15%. This translates to a higher APR than your typical loans.
Considering that you’ll have to pay back this loan in a few weeks time and in a single lump sum, the amount deducted from a borrower’s paycheck is too hefty, leaving them with almost nothing to live on.
It then forces them to take a new loan just to get by until another paycheck. The cycle continues and eventually becomes difficult to break.
Payday loans are a great way to solve short-term financial needs only and should not be used as long-term financial solutions.
To break the over-reliance on payday loans, several states have come up with laws regulating their use. There are also regulations in place to protect payday borrowers from predatory lenders who are out to take advantage of their vulnerability. The department of business oversight has, therefore, put a restriction on the amount borrowers can borrow and the amount lenders are allowed to charge as interest.
Eligibility for online payday loans
To qualify for a payday cash advance, you have to:
- Have a stable source of income either from employment or business.
- Be a permanent resident of the state you are borrowing from.
- Have an active bank account.
- Have active contact address.
Important tips for borrowers
To save yourself from a wrong financial decision, it’s important to be cautious when applying for a loan online. Ensure you do the following:
- Borrow an amount you can comfortably pay back. Know your income vs expenditure and apply for a loan that you can pay back without incurring more expenses inform of penalties and rollover costs. If you do that you may find your self in a payday loan consolidation program.
- Before signing a loan agreement form, ensure that you read and understand all the terms and conditions. Ask questions if you still have doubts. If you don’t agree to a particular clause, you can walk out of the deal. You are not obliged to agree to their conditions.
- Shop around for lenders with the most affordable rates. Work with lenders with the lowest interest rates and flexible repayment terms.
If you are wondering where to get affordable lenders, stress not. We have an excellent customer service team that will ensure your needs are met within the shortest time possible. Fill out our loan application form today and let us connect you with a pool of trusted party lenders who’ll ensure you receive the funds for that nagging emergency instantly.