A payday loan, or cash advance, is a short-term loan intended to help you bridge gaps between paydays when emergencies arise finding you short on cash. They are convenient and at times necessary when critical payments come due such as utility bills, mortgage or car payments, etc. They can help you avoid a negative credit report. But unless they are used wisely, they can cause more harm than good. Understanding how they work can make the process less prone to problems.
What you Should Consider When Applying for a Payday Loan or Cash Advance
You can apply for these loans either online or in person at outlets scattered throughout most major cities. Obviously online applications are more convenient for most people. Regardless of which you choose the process is the same. The lender will require identification in the form of a drivers license, your social security number, employment information, checking account information and the amount you wish to borrow.In general you may apply for these loans regardless of the quality of your credit score. This is because you give the lender permission to take funds directly from your checking account on payday, so their risk is minimize. Processing times may vary between lenders but most loans can be approved or declined within minutes and funds transferred directly to your bank account the next business day.
Ask About Fees
Many payday loan services are not actual lenders themselves, they will take your information and submit it to multiple lenders for approval. The advantage to this is that you may receive more favorable rates and repayment terms. But often the servicer, acting as a middle man, will actually ad costs to your loan. Some states require these companies to operate as a “Credit Servicing Organization” or CSO and restrict the amount they may charge for their services. So for example, they may obtain a 30 day loan for you at a rate of 15% of the face value of the loan plus a fixed fee of $50. So a $300 loan can cost you $45 for the 15% lender fee plus $50 for the CSO, for a total $95 fee on a $300 loan.Your best option is to locate a cash advance or payday loan lender who operates as a direct lender. Not only can the approve your loan quickly, often within minutes, but their fee structure is typically much lower. Many will offer a flat rate fee based on multiples of $100. For example a $15 flat rate fee per $100 borrowed for 14 days would cost $90 for a $600 loan.
The actual fees charged by a lender can vary depending on your state of residency. State laws governing credit service organizations regulate the fees they may charge. So don't be surprised to see relatively large differences in finance fees from state to state for the same loan amount.
