Wednesday, October 30, 2013
Getting a Payday Loan at a Store Versus Online Services
A payday loan (also called a paycheck advance or payday advance) is exactly as it sounds... a small, short-term loan that is intended to cover a borrower's expenses until his or her next payday.Payday loans are only set up to cover the borrower until they receive the next paycheck from their job. It is typically only for a short term period of 7 to 14 days before payment in full is due. Legislation & Laws regarding payday loans can vary widely between different states and even different cities within a state.There are some states and jurisdictions impose strict usury limits and limit the amount of interest a payday lender can charge. Some jurisdictions outlaw payday loans all together. Then some have very few restrictions on payday lenders.Due to the extremely short-term nature of payday loans, the interest and APR can seem very extreme when compared to a traditional personal or signature loan that is normally spread out over a year or more.In very simple terms for each $100 borrowed a typical payday loan could cost anywhere between $15, $20, $25 to as much as $35 depending on the company. So if you borrow $100 dollars today you are required to pay $115 dollars or as much as $135 dollars two weeks from today. This is why it is good to shop around and compare companies.Loan Stores: Borrowers visit a payday loan store and secure a small cash loan, with payment due in full at the borrower's next paycheck (usually a two week term). The borrower writes a postdated check to the lender in the full amount of the loan plus fees. On the maturity date, the borrower is expected to return to the store to repay the loan in person, and the check is handed back. If the borrower doesn't repay the loan in person, the lender may process the check traditionally or through electronic withdrawal from the borrower's checking account.If the account is short on funds to cover the check, the borrower may now face a bounced check fee from their bank in addition to the costs of the loan, and the loan may incur additional fees and/or an increased interest rate as a result of the failure to pay. For customers who cannot pay back the loan when due, it is always best to contact the payday loan company as soon as possible to workout an extension to keep from depositing the check.Payday lenders require the borrower to bring one or more recent pay stubs to prove that they have a steady source of income. The borrower is also required to provide recent bank statements. Every company is a different when it comes to approval. But in general if you can prove you earn enough to cover it then the payday loan is approved.Online Payday Services: Most people feel that going to a payday loan store is kind of an act of last resort. Sort of one step above a pawn shop and viewed as a sign of financial issues. For this reason many people seek a more discreet way of using payday loan services. Thus the dramatic increase in online payday loan companies.Online payday loans are marketed through e-mail, online search, paid ads, and referrals. Typically, a consumer fills out an online application form or faxes a completed application that requests personal information, bank account numbers, proof of income, paystubs etc. The borrowers faxes copies of a check, a recent bank statement, and signed paperwork. Then the loan is approved.The money is direct-deposited into the your checking account. If you the ability to fax from home then you never have to leave your home until you're withdrawing the money from the ATM. Extremely convenient!And recently some online companies have even been advertising themselves as "no faxing is required".The significant difference with online payday loan companies is that the loan re-payment is almost always done the same way it was given... through a electronic withdraw from your bank account. Therefore it is very important for you to be confident that the money will be in your checking account and the specific payment due date.Obtaining a payday loan can be a welcomed option in many cases of unexpected emergencies like car repairs, heat goes out in the middle of winter, etc. etc. Also an alternative for people with poor credit because there are no credit checks. You only have to prove that you have the ability to pay back the loan.However, it is important that you are fully aware of the total repayment cost... and confident you will be able to pay it... when it is due... BEFORE you accept the loan.