While getting a quick loan with no hassle may sound like a dream come true, it is very important for potential borrowers to understand the specifics of PayDay and cash advance loans. Such knowledge is necessary to ensure that borrowers are making the most informed decision regarding their finances. This knowledge is imperative to protect the borrower, but also the lending institution as well. After exploring the basics of the PayDay loan, which is also commonly referred to as a cash advance, information regarding the protection of both sides of these loans will be provided.
Not everyone has the best credit. Unfortunately, with many lending institutions, credit is the primary basis for determining a person’s borrowing potential. Poor credit scores can result in higher interest rates, smaller loans or even the flat-out denial of the applicant. Thankfully, there are alternatives to traditional loans in the form of PayDay loans. Lenders offering PayDay loans do not require a credit check, making this a particularly viable option for individuals who have less than desirable credit. These loans are discreet and no one aside from the individual and the lender are involved. No additional companies need to be called and there is no need for references; no one else has to know about the transaction. In order to be approved for a PayDay loan, potential borrowers are only asked to submit certain information. Most cash advance lenders limit this requisite to proof of employment in the form of a recent paystub and proof of residence, as well as a valid check and/or a legitimate banking account.
Unlike many traditional loans which often have an extended repayment period, PayDay loans are designed specifically for short-term financial relief. While the interest rate is higher for the repayment period of the PayDay loan, the payback period is significantly shorter in almost all instances. Ultimately, this has the potential to actually save individuals when it comes to interest. Individuals who take part in these cash advance loans are only able to borrow money until their next pay day, which is the origination of the cash advance’s popular nickname. When the loan period has expired, the lender is able to automatically withdraw the amount of the loan plus interest since the borrower submitted with their application their repayment information. When the individual gets their next pay check the loan money is returned to the lender, ensuring that the cash advance provider receives their money when it is due.
Oftentimes, traditional lenders specify how their loan money may be used. For example, there are auto loans, school loans and home loans where the cash goes specifically to a designated receiver for an exact purpose and it is not left up to the individual. When it comes to PayDay loans, the money can be used for whatever is needed. There is no special application if the borrower needs the money for a car payment or repair, a medical bill or birthday presents. The cash is there for the borrower to use in whatever way they see fit. Individuals are allowed much more freedom in their time of need.
It is very convenient to get a PayDay loan or a cash advance. Applications may be submitted in person, over the phone or via the internet. This allows individuals to apply for such assistance in whatever manner works best for them as an individual. There is no need to wait in long lines or waste gas driving to a specific lender who could be located far away. As a result, borrowers can save both time and money.
Another benefit of the PayDay loan is the amount of time before the individual gets their money. The better cash advance lenders will be able to get their customers the cash requested in a matter of hours. Alternatively, traditional loans can take days to process all the paperwork relevant to a loan. Even after this time has passed, potential borrows may be denied. If time is of the essence, PayDay loans definitely have the upper hand due to their limitation of required paperwork and lack of credit check. Loan processors are simply able to complete their requisites faster, getting the money to borrowers quicker.
With these questionable economic times, more and more individuals are in short supply of cash – especially with the holiday season looming. Word of mouth advertising is one of the best ways for companies to increase their number of clients, so if a borrower has a pleasant experience with a lender they are much more inclined to discuss this with friends and family members who might also be in need of a monetary advance. This helps create excellent public relations for the lender. However, individuals who have a poor outcome with a lender, whether it is the lender’s fault or not, are just as, if not more, likely to discuss the negative aspects of the transaction with acquaintances, thus harming the lender’s reputation.
The PayDay loan industry gains nothing by being predatory or picking on those with financial concerns. Doing so would limit their success and force them into shutting down as a result of lack of genuine, justifiable and reasonable business. It has been estimated that two-thirds of the cash advance lenders in the nation are independently owned and operated by small-business entrepreneurs. These are individuals who have invested their own money in the business. Understandably, these are people who would want to invest wisely and not simply throw their money away. For those who are concerned prior to applying for a cash advance, little research would be required to find out who owns their prospective PayDay lender and what their reputation is. Borrowers should be sensible about from whom they choose to borrow money.
Obviously one of the biggest concerns individuals researching PayDay loans have is the interest rate. Many people are distraught by the prospect of having to pay back an exorbitant amount of interest. This is an understandable concern for those who are unable to pay back the loan or those who are tardy in paying it back. Individuals who are able to follow the conditions of the loan are presented with a straightforward proposition from the lender and are, in part, paying for a service available from few others. When approached and utilized responsibly, PayDay loans are able to help those who are in financial distress.
The interest rates are higher when it comes to PayDay loans and short-term cash advances. However, it is also important to acknowledge that running such a business can be high risk and most owners are not getting rich quick; many times, the business actually requires such rates to stay in business. These owners are simply running a legitimate and focused business. Again, research on individual lenders is required in order to ensure this as there are always exceptions. In addition to this, most PayDay lenders charge a flat fee, which is required by federal law to be translated into an Annual Percentage Rate, or APR. This is not always a fair representation of the loan. Such a process may be compared to buying a pair of shoes. Individuals may have to pay more up front to get the pair they want which is currently stocked in the store – or they could try to order a pair from a store that charges a little less. If they need the shoes immediately, they are presented with only the first option as a viable solution to their predicament.
Borrowers get what they pay for in these types of instances. Whether short-term cash advance companies are around or not does not determine how many individuals would turn to such services. Their establishment does not directly affect if people need money; these companies offer something that many people need. Every production operation has some ‘bad apples’, but it is ignorant to define an entire industry based on the minority. As with any decision, individuals are encouraged to examine their personal situation and needs, research their options and approach the situation maturely and conscientiously.