What is a payday loan? If short-term liquidity is your problem and you are solely dependent on your paycheck, then well, payday loans can be one option to bridge the gap. These are short-term loans that help you tide over your cash needs until you receive your paycheck. Typically you have to provide a post-dated check to the lender who will encash it once money gets credited to your bank account. They are very high-cost loans generally taken for a small amount, say, a few hundred dollars. Normally $500 is set as a limit but it may sometimes be a little plus or minus the limit.
Features of the loan:
- The loan is generally for a small amount and taken mostly to meet an emergency medical expense, settle any bills, to pay overdraft, etc.
- It is a short-term loan normally due to be paid back in a few weeks when the paycheck is credited or when you get your social security payments.
- The repayment is usually done as a single payment along with the fee and the mode is as mentioned in the loan agreement.
- They are very expensive than the traditional loans with an APR-Annual Percentage Rate of almost 400%.
- These are usually unsecured loans, which means there is no necessity to furnish any security to obtain the loan.
- Your credit score is also not a parameter to get the loan.
- If you are unable to repay at the stipulated time, then your penalty fees get accumulated, thereby increasing the burden.
Different rules govern different states regarding the amount that can be given as a loan, the rate of interest, and the fees. This has to be examined in detail before proceeding to get the loan.
How to get the loan:
These loans are available at storefront payday lenders and also online. In an online mode, you just have to fill-up the form and provide account details and the amount gets credited to your account. When the amount is due the lender can withdraw from the same account.
There are a lot of apps available these days that provide loans at the click of a button. Popular among them are, Earnin, Current, Brigit, and Moneylion.
Recently, Banks have also moved into this loan segment. But the risk and the terms are almost the same as that given by other lenders.
These loans, though weigh higher in terms of risks are mostly resorted to, to meet the month-end money blues.