There comes a point in everybody’s life that payday is just too far and expenses and creditors are just too near. This could be because of a myriad of reasons, but the point is that there are bills to pay with no money in sight.
It is for this purpose that some financial institutions and money lenders offer what is known as a payday loan. A payday loan (also known as a paycheck advance) is given to people to help them cover their immediate expenses until their next paycheck arrives. It is treated as a short-term loan and is also subject to interest rates being imposed.
Due to the controversy of the nature of the loan different countries and the different states of America have imposed strict laws governing these loans. Some states even outlaw the loans completely.
The payday loan works as follows: You approach the moneylender with proof of your income and the date on which you are paid (in the USA this is normally a two-week period). You then receive the cash advance that you applied for. In return you write a post dated check for the full amount and hand it to the lender. When payment of the loan is due, you are expected to come into the lender’s offices and pay the loan in person. Should you not do so, the lender may then process the post dated check either traditionally or via electronic withdrawal. Should the check be returned because there are insufficient funds in the account, the debtor will face further interest on the loan amount, as well as bank charges for the bounced check.
It is important that you understand the interest rate, as it makes a difference in how much you have to repay at the end of your loan period. Finance rates in the United States are between 15% and 30% and calculate to astronomical rates when calculated annually.
It is also possible to make a payday loan via the internet. This involves filling in an online form in which you provide your personal details as well as your banking details and social security number. This is a risky practice, but is growing in popularity.
The best advice is to work out a budget that will make your money stretch for the entire month and strictly stick to. That way you may avoid getting into debt.