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Basic principles of payday loans online
Sometimes it happens that a person urgently needs money to close the financial gap or one certainly has to buy something before a salary. At a previous time these difficulties were solved with the help of relatives or friends, when a person came and asked for a certain amount of money. Today the situation is much simpler. You can get money quickly and easily by means of so-called «Pay Day Loans Online».
Nowadays PDL is well-known in European countries as well as in the USA. Moreover, it is constantly used every day.
Bangladeshi Muhammad Yunus was the first who invented this type of loan and started to lend small sums of money. His first clients were middle-aged women, who needed extra money for daily needs. By the way, just for Bangladeshi women Muhammad created his famous Grameen Bank. Than the idea of payday loans were caught by other financiers and appeared in countries all over the world. And of course the USA is one of the first countries where this idea appeared.
What is a pay day loan? How does it work?
"Pay day loans online"(also called as “Cash Advance Loans” or “paycheck loans”) - are small loans that are issued for a short time (from three days to two months) and which can provide you with money quickly and easily when you need it. So you can pay your bills and liquidate late payments.
Indeed, it is the quickest loan you can lend. The point is that you should follow 4 steps:
1st -find a good company to deal with
2nd- apply an application form (usually online, which takes 5-7 minutes)
3rd – agree to loan terms by singing your loan documents
4th- get cash
What concerns additional documentation, it varies by state. But most common ones are: a bank statement, pay stub, social security card or state issued photo identification. More detailed description of terms by state can be found on companies’ websites.
What are negatives and positives sides?
By all means, paycheck loans are more available to wider popularity than bank loans, which make them very convenient.
Also people with damaged credit history can get it. The thing is that payday loan services do not check their customers' credit scores. Payday lenders are interested only in your opportunity to pay back your loan. Probably, they just want to know if you have a job and if you make so much money per month.
Furthermore, Cash Advance Loans are rather flexible. It means that you may spend money on what you like. In comparison with other types of loans, when you take a credit to a particular thing. For example, if you take a car loan, you’d have to spend the money on a car only.
Besides, payday institutions are often open around the clock, which allows you to obtain cash loans at any time. It is likely to have online presences, which allow you to apply for loans online. What is more, it is rather quick to get payday loans. Which is a big plus if you are short of time.
As you can see there are a lot of positive sides about payday loans online.
That sounds good, but what's the catch?
First of all, «Pay Day Loan Online» is the most expensive type of credits. For the convenience and speed of obtaining «paycheck loans " customers pay interest rate, which is on average 1-2% per day or 365-730% per year. For example, if you take out a $1000 loan, a lender expects you to pay back the $1000 plus $150 to $300 more as interest. So, if you average it out, it will be over 400% in annual interest. In view of that even the worst credit cards charge only 30%.
It goes without saying, these overpayments are due to the high risk, which is associated with the facilitation of the issuance of such loans. The lack of collateral and proof of individual's income leads to large losses on loans. Companies are not able to verify clients thoroughly in such short period of time, so the decision on the loan is taken out with a certain degree of risk. The increase of lending rate is a compromise.
It is important to know that if a borrower does not repay his debt quickly, then a payday loan can grow incredibly fast and one can end up with bad credit scores.
Also “Cash Advance Loans” are lent out only for a short period of time. If you need a credit for several month or longer, payday loans are not exactly what you need.
Unfortunately, some payday lenders are thought to be dishonest and use some illegal tactics. That may be so, but if you don’t borrow money from a lender when you feel uncomfortable or have doubts about the legality of the transaction, you won’t face such problems. Happily, there are hundreds of lenders who won’t rip you off and will take your business with great pleasure.
Actually, easiness of getting payday loans also causes a trouble. A small amount of money may seem not to be a big deal and you may assure yourself that you’ll pay it back easily. But don’t forget about a high rate which lenders ask you to pay for their service. Also you may quickly become addicted to cash if you get payday loans online regularly.
Payday loans are legal in 27 states. 9 states allow some form of short term loans, but with restrictions. Another 14 and the District of Columbia forbid such business at all.
The Consumer Financial Protection Bureau (CFPB) has a specific authority to regulate all payday lenders, regardless of loan size. If you have questions about payday lending you may ask them on a website which is operated by The CFPB.
According to the statistics, every fourth American is interested in payday loans.
Payday loans online are permitted in Canada.
They are governed by their individual provinces, for instance in Ontario APR is 562%.
All in all, if a payday loan is an only available option it can be a great cash advance for people who can pay it back on time. By the way, there are plenty of lenders for you to choose whom you would like to do business with. But before you rush into getting a credit, spend a couple of hours searching for a decent company:
Firstly, collect all possible information about the organization in which you plan to take a loan.
Secondly, check is it have license to operate or not.
Thirdly, take into account that different lenders have assign different interest rates and credit terms. So be sure they will suit you.
Finally, you can apply for lending money. Strong advice is to pay your loan back as soon as possible. Otherwise you’ll be charged expensive additional fees.