Factors of getting a payday loan

There is an affordable type of financial loan that is being offered in the market today and this type of loan is referred to as payday loan. Payday loan is a short-term that have three distinct features namely that the loan amount is relatively small, full payment is usually due to the borrowers next payday and borrowers are obliged to give the lender or lending company access to his or her checking or ATM Account or in some instances require the borrower to provide the lender a post-dated check for the full amount of the loan plus interest and finance charge.

A payday loan can also be categorized as short-term small loan and although the loan has basically three features, lenders or the lending company can include a variation of the loan like including an interest-only payment, lump sum payment and/or loan renewal of the loan. Small lending entities such as pawnshops and other retail outlet are the normal source of payday loans. The loan amount is immediately issued to the borrower upon applying from the outlet. There is no extensive credit or background check on the borrower and it is only the loan contract that the borrower has to sign that will indicate that the borrower must repay the loan in full once he or she has received his or her next pay check.

The drawbacks of a payday loan are the more than normal interest rate and high financing fees. The usual guarantee that the payday loans will be re-paid is the borrower’s obligation to issue a post-dated check to the lender (upon receiving the cash loan) which includes the principal amount, finance charge, interest amount and other incidental fees of the loan.

As soon as the payment due date arrives, the borrower is expected to go back to the payday loan outlet and pay in cash the total amount due on the loan. The lender, in turn, will return the post-dated check earlier issued to him but in the event that the borrower does not arrive at the appointed time, the lender has the right to the cash or deposit the post-dated check. There will be additional surcharges and a possible lawsuit in the event that the post-dated check issued to lender bounces.

A payday loan is also a type of personal loan but with a much higher risk and to lessen this risk, payday lenders require the borrower to show proof of steady income and this usually comes in form of multiple payment stubs, business license or employment certification from the borrower’s employer.

 

 

Consequences of being in debt

Borrowing money by applying for a bank loan or any other type of loans is a very serious move. Filing for a loan application will surely have a tremendous impact and would probably alter your usual management of your finances. You would always think first is how to get a loan but, it is still necessary to initially ask yourself whether you really need the loan or not. If the answer is yes then you should be ready to face all of the consequences of being in debt for several months or even years depending on the amount of money you want to borrow.

Nowadays, it is quite common that most people are much uninformed when it comes to borrowing money from an external source. So the first thing that borrower must learn is to understand what a loan is and how it will impact our financial status once the loan is approved and released to us. For instance, if you had applied for the big amount of business loans, it is necessary to study first the capacity to pay for the business once the loan is released. If you are the businessman involved in the loan, then you would have to seriously study whether the company’s income will able to handle several months or years of a large amount of amortization.

When borrowing money, it is important to know what type of loans exists on the market today. This is to make sure that you are applying for the right loan for you or your business. Remember that the only thing identical among financial loans is the fact that it would provide monetary consideration to the borrower. The procedures, processing, interest rate, finance charges and other factors will surely differ from one another. For example, a business loan is different from a car loan or a personal loan can either be secured unsecured or can be a type of flexible loan. In short, no two types of loan are alike so it is important that you fully understand the various types of loans and their functions.

When finally deciding to take out a financial loan make sure you know the type of loan you need to get and learn all you can about it. If the amount of loan is quite large and would entail for you to pay a large amount of amortization for it, it would be wise to talk to a financial analyst and perhaps a lawyer to know the dos and don’ts of borrowing a large amount of money.