Payday loans are particularly useful when you need instant cash. Unforeseen cash crunch is not uncommon. You may any day need cash to pay your laundry or credit card bills or to fund any other expense. Your friends, parents or colleagues may not be able to help you. Financial institutions such as banks usually do not accommodate applications for quick cash. Though some banks may offer loans for personal expenses, the loans belong to a different category and may not be approved instantly. Under the given circumstances, payday credit may be your best bet.
What is a payday loan?
Simply put, a payday loan is a financial assistance which you can use to fund your expenses till your next payday, or till the day your next salary check comes. Of course, you need to repay the loan when you receive your next salary check. This loan is popular in many parts of the world, especially in the United States and the United Kingdom.
You need to note that this loan is basically a short-term loan and must not be confused with any long-term loan such as a home loan. You quickly take the loan to fund one or more expenses and return it when your next pay is credited.
Like every other loan, you are required to pay an interest, also known as the Annual Percentage Rate (APR). APR depends on the payday lender’s policy, loan amount and term. So, obviously, the interest rate varies depending on individual lenders.
Advantages of pay day loans
First, you are able to quickly fulfill your need for quick cash. Payday companies specifically lend cash for situations when you urgently need money. This is a unique advantage because, usually, no other financial institution will lend cash at such a short notice. Some payday companies can even lend money within a few hours of you submitting an application for loan.
Second, the loan approval process is usually quick and hassle-free. This is understandable given the basic purpose of the loan and the urgency of customer requirement. Unlike in case of some other loan types such as home loan, you are not required to submit a lot of documents. Neither are there multiple stages of verification and approval. Usually, lenders need you to submit only your income proof and bank account details. The application is quickly verified and upon approval, the cash is credited to your bank account.
First, since the APR can vary across lenders, it may make sense to first identify the lowest available APR and then apply for the loan. This way, you are reducing your repayment obligations. This is not a time-consuming exercise as almost all payday lenders allow you to calculate the repayment amount for a specific loan amount on their website. So, calculate first and then apply for the lowest available interest rate.
Second, quickly obtain feedback on a lender first. Existing and former customers of different companies record their feedback on different websites and online forums. It should not be too difficult to obtain the feedback.
Third, repay the loan by the due date. You need to note that if you fail to repay by the due date, your financial obligations may compound. If possible, you may also pay back before the due date. Confirm with your lender whether any prepayment charges apply if you prepay the loan.