Payday loans also called the cash advance loans are short term loans which are offered to the borrowers where they are required to make the payments by the next payday. These loans are offered by specific loan companies or the lenders who deal with them only. Getting these loans involves an easy procedure and can be had within 24 hours of application. With the advent of the online methods, these loans have become even easier and quick to avail. One of the greatest concerns related to these loans is the high interest rates on them which often gets to the levels of 400% APR.
These loans are unlike the conventional loans which come at a lower interest rate and flexible terms. The payback period for the cash advance loans is not very high bit that of the conventional loans can go up to 30 years as in the case of the high value mortgage or the auto loans. One can get an amount equivalent to $100- $2000 under these loans. In terms of documentation, one has to provide the employment details and the income proof to the lenders for the processing of the loans. Other than this the applicant needs to have a checking account which is active so as to make the transfer of the loan amount.
When it comes to the repayment of the loan, the borrower has to provide a post dated check to the lender for the amount which is equivalent to the principal and the interest on the loan. Within 2 weeks time once their payday arrives, the borrowers need to repay the loan in full as a lump sum on the due date. If they cannot, the lender puts the check into the bank to recover the amount.
Roll-over and applicability
There are situations when the customers fail to make the repayments on time. In such conditions there are a lot of states in the US where roll-over of the short term payday loans is allowed. Under the terms one is allowed to repay the loan within the next 14 days. However, once the term ends one is liable to make the payments for the principle amount along with the interest rates applicable on the period of 4 months which includes the period of roll over where an additional interest is applicable. This is not allowed in a lot of states too.
High interest rates
The payday loans have often been in news for the wrong reasons – the high interest rates applicable on them. Well, when one takes these loans, they should clearly look at the interest rates applicable on them. Most of the people who take these loans do not read the terms and conditions of the loan and everything come to them as a surprise when they make the repayments. This is not true that the lenders are always at fault. It is the duty of the borrowers to ask the lenders on all the aspects of the loans. Anything which they are not clear with needs to be asked a number of times in fact till the time they are clear about them.
If one is aware of the way the interest rates are calculated on these loans there are less chances that they will get disappointed on any of the areas when it comes to the net lendthe repayments. A lot of people compare the payday loans with the conventional loans offered by the banks. Remember, these loans are in no ways comparable to the bank loans. The amount of documentation and the degree of verification that goes in the bank loans of any sort is no match to the payday loans. These are extremely short loans which come for a brief period with no collateral and credit checks. The risk on the payday loans is very high and probably that is the reason behind the issues faced by people.
However, these loans fill the gap which the banks leave by not funding the bad credit lenders in urgent need of money.