Payday loans have become quite popular in the United States because they come to the rescue of many people at critical times before they receive their salaries. The short-term loans, which are also known as payday advances, are borrowed to help in taking care of urgent needs before the salaries arrive. Even the most budget-conscious person can get into an emergency situation where such a loan may prove helpful.
In general, the loans amount to about 20 percent of the gross monthly wage. While they used to be more popular with low-income earners, the advances are nowadays common even among well-paid individuals.
Are the Advances Accepted Everywhere
The payday advances are legal in 37 U.S. states where there are guiding regulations. However, the laws in some states make the advances either not feasible or against the law.
The Application Process
The process of getting a payday advance is relatively simple and there is usually no need for a credit check. Many lenders ask for the following requirements:
Proof of steady income.
A monthly wage of at least 0 although this depends on the lender and state.
A citizen who is 18 years old or above.
An active bank account where direct deposits can be processed.
Applicants must provide their banking details and confirm their identities. Although this process is often conducted via fax, there are also faxless services. As a rule of thumb, no fee should be paid up front. Borrowers may apply for the loans at storefronts but many applications are nowadays processed online.
How is the Money Received?
The money is transferred directly into the borrower's bank account for online applications. In case of storefront loans, the borrowers provide post-dated checks covering the loan amount and related charges in exchange for cashable checks for their loan amounts. Some lenders may also provide cash.
The cash advances are usually repaid in one lump sum when the loan term ends. Post-dated checks are cashed at the right time. Alternatively, the amount is withdrawn from the borrowers' bank accounts in case of online transactions.
The loans are usually payable within a fortnight. However, the time may find a borrower still unprepared. National Trade Association members are required to provide extended payment plans at no extra cost. Some states also have laws requiring extension of payment plans.
However, extension must not be confused with rollover, which is effectively another loan on top of the existing one with additional charges.
These advances have several advantages over conventional loans.
The amount of money borrowed in relatively small
Loan applications are less complicated and take a short time.
The loan amounts are received quickly, which makes them ideal for emergency situations.
The one-time fees are usually stated in advance so the borrowers know exactly what they will pay.
Available to those with poor credit ratings who cannot get other types of loans.
The term of the loans is short, often one month at most.
It is important for borrowers to understand that payday loans are meant to address short-term financial difficulties. These may be such emergency situations as medical or auto repair expenses that must be met before the end of the month.