What is a Payday Loan?
Payday loans are different than a typical personal loan. Usually you can apply for these loans through a payday lender either in person or online and don’t need to go through a bank. Depending on which state you live in, you may be limited to the amount you can borrow, and the lending company may be restricted in how much interest and fees they can charge. The money is delivered to you quickly, usually on the same day, in cash, by check, or deposited directly into your bank account. A finance charge is applied, and the amount of the loan plus the finance charge must be paid back in full within two weeks, or on the date you receive your next paycheck.
Each year, an estimated 2.5 million people in the United States take out payday loans. These types of loans are appealing to those who have bad credit, low income, or have trouble securing a traditional loan. If you have experienced trouble securing a traditional bank loan, and you are uncomfortable asking friends or family members for financial help, a payday loan may be a good option for you. This type of loan is fast and easy to get. The payday lender may not require a credit check, and typically lenders qualify borrowers who have an ID, bank account, and are employed.
How Much Is the Average Payday Loan?
Payday loans can range anywhere from $50 to $1,000, depending on the state. The average loan is about $350 on a two-week term. Some states may limit your loan amount to 25% of your monthly income.
How Much Are the Fees for a Payday Loan?
Fees can range from $10 to $30 for every $100 that is borrowed. So if you take out a two-week loan of $100, you may owe between $110 and $130 when the loan is due. This comes in handy when you have an unexpected car repair that costs $100 to fix, but you don’t get paid for another two weeks. A payday loan can get you the money you need right away so you have transportation to and from work for the next two weeks, which can be well worth the extra $10 to $30.
How Is a Payday Loan Repaid?
These loans are usually repaid in full within two weeks or when you receive your next paycheck. Your lender may offer several payment options, including a post-dated check provided with your loan application, a check you provide on the day the loan is due, an online payment, a direct debit from your bank account, or a credit card.
All in all, payday loans can be an easy way to get the money you need quickly. As long as you are aware of the terms of the loan and the amount you are expected to pay back, they can be a saving grace when unexpected emergencies arise.