Payday Loan Basics

Not everyone knows or understands the basics of payday loans. If you are in need of some emergency cash, you may want to consider getting one. These loans do have some advantages over a traditional personal bank loan or credit card but there are some serious downsides to consider.

Image of a man holding a wallet and removing cash.

How Payday Loans Work

A payday loan or cash advance company will do no credit checks to qualify you for the loan. The loan is based on your ability to repay the loan. This can be verified by a check stub from your employer and a verified bank account. These loans are generally used by people who do not have access to credit cards due to poor credit. They are also sometimes used because banks will generally not loan amounts that are as small as people request through a payday loan.

Types of Payday Loans

There are basically two kinds of payday or cash advance loans. There are paperless payday loans where there is no faxing or emailing necessary to qualify for the loan. The other type are loans where you will need to email, mail, or present in person documents to verify your income.

The Disadvantage of Payday Loans

The disadvantage to using a payday loan compared to credit cards is the interest rate is much higher. That is because the loan is considered a high risk, short term loan. It has different properties than a credit card.

Another disadvantage is the payday loan will be payed back in a single payment. The payment will be set up and deducted from your checking account automatically on the due date. You will want to make sure the funds are there on the due date. There will be a hefty fee if the debit is rejected from your account.

In some cases, installment payments can bet set up but the interest rates can end up being in excess of 100%. Many people have quickly found themselves in deep financial trouble after taking on a payday loan that they could not pay back on time. A traditional credit card, even one with a higher than average rate, will end up costing less than a payday loan.

Make Sure To Compare Rates

Compare company fees and make sure that you are paying the lowest fees you can for this short term loan. Keep in mind that interest accrues everyday, so make sure you only use the loan for the time you need.

With a recent bankruptcy or foreclosure, or just bad credit, it can be really difficult to get approved for a credit card or personal loan. Consider a cash advance loan online. They are convenient and can save you the hassle of applying for a new credit card. You can get the cash quick.