Facts about Payday Loans

“A small amount of loan provided for a day with high rate of interest(according to borrower’s income) expecting to get refunded within next payday of loan or receiving of their next wages.”

What is Payday Loan?

These loans are short term loan provided according to borrower’s salary/wages to meet their short term liabilities. These loans are lended with a mutual or written agreement between lender and borrower. Payday loans are unsecured loan available through online or storefront. Also known as “cash advance, cheque advance, deferred deposits, post dated cheque loans”.

According to study by The Pew Charitable Trust, “Most payday loan borrowers (in US) are white, female, and between 25-44 years old. However, after controlling for other characteristics, there are five groups that have higher odds of having used a payday loan; those without four year degree college; home renters; Africans Americans; those earning below $40,000 annually; and those who are separated or divorced.

 What is the process of applying for loan ?

There are two process for these loan which are basically the same:

  • Walk to Payday lender store and apply for loan providing some personal and financial information through application form; request for amount in dollars; pay the fees for loan; receive cash on hand or deposit on your bank account.
  • Apply online by following the offline process on website( fill application form; request dollar amount; pay the fees; receive in your bank account).

Positives:

  • Payday is provided for two to four weeks of repayment, or next receiving of their salary/wages.
  • Borrowing or Repay of loan can be done either by cheque, cash, net banking, credit card or prepaid debit card.
  • Payday has an advantage for borrower as it can be refunded in installments.
  • Verification of borrower is done through their bank statement, or pay stubs
  • If failed to repay, provider can charge additional fees or increase their interest rate to borrower.
  • Payday can be helpful to those who don’t have credit cards or savings.

Negatives:

  • Payday is provided with a high rate of interest (lender charge it as per borrower’s income).
  • Some state may not permit for the payday loan at interest rate as it is not mentioned liable in their state laws.
  • APR on payday loans are 400% but it can be as high as 5000%.
  • Some companies provide loan on their own underwriting criteria which does not follow bank rules.

How does it work?

  • Loan is provided from typical small merchants with physical location that allow onsite credit application and approval.
  • Payday amount can be provided from $100 to $1500 ( with above or below limit).
  • An agreement is signed with a specific date mentioned of repayment.
  • Borrower’s income is used as collateral.
  • Amount is expected to refund in 2-4 weeks.
  • According to Consumer Financial Protection Bureau (CFPB) interest fees are charged as 10% to 30% for $100 for cash as per Annual Percentage rate(APR) of 400%. Whereas 9% to 30% for credit card.

Who enjoys this facility?

  • Without four year college degree
  • Home renters
  • Africans Americans
  • Earning below $40,000 annually
  • Divorced or separated.
  • Females
  • Aged between 25-44 years old.

 

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Lorem Ipsum is simply dummy text of the printing and typesetting industry. Lorem Ipsum has been the industry's standard dummy text ever since the 1500s, when an unknown printer took a galley of type and scrambled it to make a type specimen book. It has survived not only five centuries,