A payday loan is a
short term loan which is provided in return for a post-dated cheque. The post
dated cheque would be made payable on the date of your next pay day or maybe
the following one. You can either arrange to pay the loan off in full before
the due date on the cheque or alternatively allow the cheque to be presented. A
payday loan really is an emergency loan when you just do not have the funds to
make it through until your next payday. Very often it is some emergency that
just has to be paid, example a new heating boiler.
There are some obvious
benefits of using a Payday loan in this manner, particularly if you consider
the alternatives.
1. - There are fees
for a payday loan but costs are probably less than the additional bank charges
incurred for exceeding an overdraft limit or the cost of exceeding the credit
limit on a credit card or incurring late payment penalty charges.
2. - Payday loans
don't affect your credit status because the companies that provide payday loans
don't report the information through the channels as other conventional lenders
would.
3. - Payday loans are
usually granted within minutes and the funds transferred to your bank account.
Conventional loans or a special arrangement with your bank would normally take
a few days.
Payday loans have been
subject to regulation in many countries and without being too specific you
should ensure you are in contact with a company approved by the regulators. We
all appreciate you are only going to contact a payday loan provider in case of
an emergency but the rules are in place in an attempt to prevent people getting
into too much trouble. The value of the loan is related to your normal earnings
so it should not be easy to borrow way over what you can afford to pay back.
The Obvious
Disadvantage of using a payday loan is the cost in percentage terms. If for
example your borrowed £200 (or $s) and had to pay back £250 (or $s) in 15 to 30
days time then £50 to get yourself out of real trouble might be money well
spent but it represents a huge percentage cost of you could fund the emergency
elsewhere.
There are a range of
regulations applicable to different countries and states on how payday lenders
should behave and what they can and can not do. These regulations vary
considerably and payday loans are illegal in some states or countries. How the
payday lenders can go about collecting their money if you fall behind with a
payment again varies considerably.
Finally a few warning
notes:
1. - Please ensure
that you read any paperwork or terms and conditions associated with a loan
before you make the commitment.
2. - Take time to
understand exactly what the loan will cost you if you repay when you anticipate
and consider what happens if you get into difficulty. It is critical that you
meet your commitments or you could soon face some very large debts.
3. - Do NOT get
trapped into a rolling over situation where you are continually getting a new
payday loan. The term rolling over is outlawed in several places in the world.
Understand your legal rights.
If you do wish to
secure a payday loan then you can either contact a local office, if you know of
one, or complete an inquiry on-line via the web. A quick search on the web will
provide you with a number of alternatives. You should be required to evidence
your recent payslip or payslips and these would probably require you access to
a fax machine.
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