Cash 1 Blog
What Is a Payday Loan and How Does It Work?
A payday loan is a loan consumers acquire by signing their next paycheck over to a lender. While businesses charge interest and fees on these cash advances, they can help provide relief when workers need immediate access to pending funds for necessary expenses.
The Pew Center on the States recently released a study on payday loans, examining individuals who applied for instant approval payday loans as well as what they put the funds toward. The non-profit organization found that underemployed workers are most likely to seek out a loan to help relieve financial pressures. Among first time lendees, 69 percent used the money to cover a regularly occurring expense, such as groceries or rent.
Another 16 percent applied for the loan because of an emergency situation, such as necessary medical treatment. NBC News reported that 70 percent of loan users have an income of less than $40,000 per year. Waiting for the next paycheck can often be difficult if unexpected bills start to mount.
Deciding If a Payday Loan Is the Right Choice
Citizens across the United States are trying to make ends meet while coping with economic uncertainty. Some consumers are turning to payday loans to help cover the cost of necessities, such as utilities and medical treatment, while others may be concerned that repaying small cash loans may add an unnecessary financial burden moving forward.
Payday lenders adhere to state laws and loan regulations. Consumers who are considering a cash advance on their next paycheck should research the fees, interest rates and payment periods their home state allows. This gives a clearer idea of a payday loan's total financial impact. Quick cash loans provide instant access to money that wouldn't be available until the next paycheck cleared. Consumers should keep in mind that they have to pay a finance charge in addition to the loan amount. This additional fee is either a flat rate or a percentage based on a loan's total balance, depending on a state's laws.
Companies like CASH 1 provide their customers with fair rates and fees in accordance with government regulation. Payday lenders only loan money to applicants who earn a steady income and can repay the balance quickly. Making an informed decision about payday loans could help to avoid future financial headaches.
Do Not Default on Your Payday Loan
As with all bills, payday loans must be paid back in a timely fashion. When applicants borrow money from their lenders, they are agreeing to pay that balance by a mutually agreed-upon date. Because these loans are advances on future paychecks, the client's next payday is usually the deadline.
Before loaning funds, payday lenders are required by law to explain all of their penalties to borrowers. Every financial institution has its own rates and charges for late or missed payments, but it's important for applicants to ensure that they understand how these additional fees are calculated. Some lenders allow their clients to take out an additional loan or extend their payment plan. This can lead to higher debt in the long run as borrowers try to cover the charges associated with multiple loans at once.
At CASH 1 we take the time to explain all of our fees and interest rates before completing a transaction. We help our clients understand their options in case they are still struggling to make ends meet after borrowing from us.
Websites Make It Easy to Get Needed Cash
Many lenders operate websites to help borrowers find the services they need. Consumers can find anything they need online, including short term loans for bad credit. This has made payday loans one of the more popular financial tools in the country.
Payday loans provide borrowers with the money they need to pay bills, rent or unexpected expenses. With access to these short-term credit options, a borrower can manage his finances to avoid missed or late payments. The low fees and interest on the loans make them a good alternative to credit cards and other long-term loans.
Cash advance lending is available in most states, and companies operate websites to help borrowers find an institution close to them. In some cases, borrowers may be able to get preapproved for a loan, which can help speed up the process. The loans can be approved within the same day, making them one of the faster options for securing cash in an emergency.
The loans are available to anyone, regardless of credit history. There is no traditional credit check, but borrowers will be required to show a valid ID and proof of income. Payday loans and their websites make finding cash during an emergency an easy process.
Joseph Priebe takes pride in assisting audiences with his articles to help them make sound financial decisions.
With over ten years of experience writing financial content his goal at CASH 1 has always been creating engaging and easy-to-digest information for anyone searching for immediate or long-term monetary solutions.
When Joseph is not writing about personal finance, you can find him photographing the Southwest United States with his 4x5 Graflex Crown Graphic camera. He is based in Phoenix, Arizona.