We all are familiar with the concept of secured loans by which a borrower can apply for a loan in exchange for a valuable asset kept as a guarantee for repayment. Payday loans are completely different from any other kind of financial loan. Payday loans are meant to rescue borrowers from short-term financial crisis conditions. Loans below $1500 are usually not granted. But sometimes that kind of money is required by borrowers. Payday loan is all about getting such loans in a short period of time.
What is a Payday Loan?
Quick payday loans that amount to less than $1500. Such loans are usually not available for new customers and customers with a very short credit history. A good track record of consistent payment of debt can help you acquire a payday loan. These loans are similar to unsecured loans because of the fact that they do not require any kind of asset as security or guarantee for repayment of the money. These loans also do not require any kind of financial assessment of the borrower. The borrower does not need to supply any details about income, work history or residence to the lender. The latter can acquire these details online. Payday loans are quite practical from a borrower’s perspective.
Financial emergencies do not announce their arrival. Anyone can crash into a state of financial crisis. A huge unexpected bill, costly repair jobs, sudden decline in health, the list of emergencies is endless. Payday loans can rescue you from these situations. Same day payday loan lenders can help you in this regard.
What is so different about it?
Conventional loan systems are incapable of handling your urgent financial needs. Quick payday loans are named so because of a reason. You can apply for a quick payday loan and acquire on the same or next business day. This is the primary difference between payday loans and other loan systems.
A word of caution: Always keep in mind how much you want and how much this loan will cost you in the end along with the interest. If the total sum of money is within your reach, then you can apply for payday loans and get over your financial crisis in a few hours.
Payday loans can be a very convenient option for you if you can pay back the money within the decided period of time. As for guarantee or surety for the loan, your next salary or pay cheque is the insurance. A reference usually helps to acquire this kind of loan. A good history of credit management is also very helpful.
Controversies – Is it legal?
In the United States of America, payday lending is illegal in 14 states along with the District of Columbia. It is legal in 27 states. The remaining 9 states have some restrictions imposed on payday loan systems. The reason for payday loans being restricted or unlawful is due to the following reasons:
- Payday lenders often charge exorbitant interest rates of around 1000%.
- Some payday loan systems have automatic rollover with keeps the debt piling
- Many Payday lenders have been known to be involved in illegal debt collection practices and use of unfair means like force
The above reasons have forced the government of some states to ban Payday lending. Certain federal laws like the Dodd–Frank Wall Street Reform and Consumer Protection Act empower the Consumer Financial protection bureau (CFPB) to control certain aspects of payday lenders.
The CFPB sites also answer certain queries of borrowers regarding payday loans. Lenders who are found violating the state laws have been pursued aggressively in the past. In some states there are also restrictions on the number of payday loans that a person can avail during a single time. Florida, Michigan, Indiana, Illinois, North Dakota, Oklahoma, South Carolina, New Mexico, and Virginia have such laws. Such laws also force payday lenders to thoroughly examine the borrower’s credentials to determine whether he or she is eligible for the loan.
The Truth in Lending Act also protects borrowers by forcing lenders to disclose their actual terms and conditions of repayment.
Payday lenders have been known to use the sovereign status of Native Americans to evade state laws. The Federal Trade Commission monitors such activities with great aggression. While some Native Americans are actually payday lenders, there are cases when tribal land based operations are run by non-Native American companies.
Payday loans are great from the borrower’s perspective if they have the ability to pay it back within due time. Both the borrower and the lender can gain a lot from payday loans if things proceed as planned. However the inability to pay back the debt in many cases has led lenders to take unlawful steps. It is therefore advised that you should always know how much you need to pay back and whether you can do that in the decided frame of time. Also be aware of your own rights and the laws in your state.
Image courtesy of Stuart Miles at FreeDigitalPhotos.net
People Also Like to Read This:
- How to Build a Blog to Make Money
- Payday loan: Benefits and Controversies
- Make Money With Your Spare Room with AirBnB
- Build Your Own Online Store to Make Money