There are a lot of misconceptions regarding payday loans. Some take advantage of them as quick cash solutions, while others are skeptical. Let’s go through some of the most frequent questions about payday advances.

What is a payday cash advance?

In simple terms, a payday loan or cash advance is a short-term, unsecured loan for small amounts. Customers who have a regular income and qualify against all the criteria can get one within one business day. As a rule, borrowers have to repay their lenders on their next payday. 15M payday loans online are very popular among people who do not have access to other credit options.

A payday loan is granted for a term ranging from two to four weeks, depending on your state and lender. All customers receive their funds by electronic transfer. The amount of money you can take depends greatly on your income level. Your lender will ask you to present proof of income by providing pay stubs or bank statements. Payday lending regulations vary by state, but they generally require the borrowers to have an above-average income regularly.

How payday loans work

Unlike a personal loan, an online payday advance does not require any collateral. The application process for payday loans online is straightforward.

1. Step 1: Submitting the form.

The form only asks for basic details, including your name, loan type, and contact details. Depending on the service, the information is available to one or more loan providers.

1. Step 2: Getting a loan offer.

If the lender approves your request, you will get a direct offer via email. A good lender will expect you to read it front to back and let them know if you have any questions.

1. Step 3: Receiving the money.

Once the lender has your signature on the dotted line, they initiate a direct deposit into your bank account. As a rule, a borrower should have the wire transfer the next business day. Sometimes, they may get the money sooner, for instance, on the same day or in only one hour.

The application process is fast on account of the soft credit check. A bank will usually pull your credit history through major credit reporting bureaus. In effect, your credit score gets lower with every check. Direct lenders offering emergency payday loans don’t usually run hard credit checks. They perform a soft check via alternative agencies without impacting your score.

What is the cost of a cash advance loan?

The finance charge for a payday loan is a flat rate ranging between $10 and $30 for every $100 that you borrow. For example, when taking a 14-day loan of $200 at a rate of $15, you pay back $230 on the due date. For a loan of $500 with the same terms, you would have to pay off $575 from your next paycheck. The APR (annual percentage rate) on a payday loan can be as high as 400%. Its exact value depends on the loan duration.

State laws dictate the maximum loan amount that list of online payday lenders may provide. Moreover, local authorities can control the APR and finance charges and set up additional restrictions. Staying informed with the local laws will allow you to spot any irregularities.

When you seal the deal for a short-term cash advance, the lender will usually ask for your approval to deduct the money automatically on the due date. That way, you don’t risk additional penalties if you forget to repay your debt on time. However, you need to ensure you have sufficient funds in your account.

Things to consider before applying for a payday loan

Before signing the loan agreement, you need to know all the terms and conditions. Make sure you know about all the terms and costs. Other than that, pay attention to the following aspects:

●     The lender’s authorization. As a rule, a payday loan provider must operate under a state license. That means their business must be registered and have a physical address. On top of that, a lender must have all the permits to conduct their business.

●     The company’s reputation. Check on the Better Business Bureau whether your lender has been the subject of any customer complaints. If that is the case, you may want to consider a different lender.

●     Other loan options. Payday loans can be helpful, but they are not a universal fix. It’s worth looking into different types of loans before making a decision. For instance, a personal loan will work better if you need a larger sum of money.

●     State laws. As a borrower, you need to be informed about the legal framework of payday loans in your state of residence. The information will guide you through the process.

Takeaway: A payday loan is a quick way to get cash urgently and solve an urgent financial issue. You need to find a trusted lender and be well informed before signing a contract.