How Does a Payday Loan Work

 

One of the most sought for loans in the market today are payday loans which are as easy as borrowing your neighbors grass cutter. Payday loans are typically availed of when there is a need to pay for monthly expenses or unexpected small expenses such as medicines, minor car/house repairs, or purchases for basic needs. Often, the people who avail of payday loans are the ones who are short in cash and live by their monthly salary or allowances. With its easy processing and high percentage of approval, borrowers flock these lenders and cause the business to become more lucrative.

Payday Loan Process

As mentioned above, payday loans are one of the easiest loans that you can avail of. It only requires you to have a stable source of income that can pay your outstanding balance. Once an application has been submitted, they only require you to issue a post-dated check that covers the full amount due plus the interest that the loan yields. Payday loans don’t require your credit score to be checked as long as your outstanding balance is payable by your following month’s income.

High Interest Rates

Loans are typically borrowing money and interest that are yielded from the loan are actually payments for borrowing and using the money for a specified period. Interest applies to all kinds of loan and is the borrower’s way to gain returns from lending the money to borrowers.

Payday loans have one of the highest yielding interest rate payments come from payday loans. Payday loans can yield from an Annual Percentage Rate (APR) of 300% to as much as 750% depending on the market demand and payday lender. These interest rate, especially when rolled over, can bring a borrower deep in debt without knowing it. This is why it is very important to make sure that borrowing from payday lenders are the last options you should consider when there is a shortage in cash.