A Payday Loan is a short-term loan, which provides the borrower to handle their finances in between each payday. The average loan is $100 - $1000 and will be due in two weeks or at the time of the next payday (within that 2-3 weeks or sooner). Sometimes referred to as payday loans or cash advances are generally acquired in a financial emergency such as medical bills, vehicle/home repairs or bills and groceries.
There are two ways to apply for these short term loans either by visiting a local payday loan lender in your area otherwise known as retail lenders or you can get them via the internet in the form of an online application. Both of these avenues will require a bit of personal information on your part such as proof of employment, bank account information and social security number.
Basically what you will do is postdate a check in the amount of the short-term loan plus interest for two weeks until your next payday. The lender agrees to hold onto this post dated check until your next payday at which point you can either “roll-over” or pay off your loan. When you rollover your loan, you will be paying just the finance charge for the short term loan and still owing the original amount. This can be both helpful and detrimental.
Its good practice to pay at least pay 20-50% plus finance charges at the time of your next payday, although paying it off entirely is the best method. Some lender will not allow you to rollover or extend your loan but many are flexible in that aspect. If you decide not to return on your next payday they will just cash your check and your good to go. Make sure you know in advance if you can rollover or extend or if the loan needs to be paid off in full.
A payday loan can offer a quick solution to an otherwise unsolvable situation. Sometimes you just can’t plan for “financial droughts” and will need a way to solve your short-term financial situation. Keep in mind that it’s best to never have multiple short-term loans with multiple lenders as this can really put you in a financial hole. Always use the opportunity of short-term loans responsibly.