Payday Loan – How To Apply

If you’re interested in getting a payday loan, then this is the right place because we are going ro give you a detailed explanation about payday loan and how you can apply for it.

Require immediate funds, but your payday is distant? Consider payday loans – repay once you receive your salary. Payday loans, also called cash advance loans, have higher interest rates and shorter terms compared to personal loans.

What Is a Payday loan?

A payday loan is a short-term, high-interest loan with a brief repayment period, often as short as 30 days. Typically, eligibility criteria are not stringent, and credit profiles are not thoroughly checked by payday loan providers, but they may involve additional fees.

Despite the drawbacks, payday loans can be helpful in emergencies if you have a steady income. It’s crucial to repay the loan promptly to avoid steep interest rates and penalty fees.

In essence, payday loans work like receiving an advance on your salary. You provide proof of income through salary slips, and based on that, the lender approves a specific amount, which you must repay within 30 days. The lack of stringent credit checks increases the risk of default, leading to higher interest rates charged by lenders.

How Does It Work

A payday lender verifies your income and checking account details, providing immediate cash in-store or online, often on the same day.

In return, they require a signed check or electronic withdrawal authorization from your bank account. The loan is typically due on your next payday, within two weeks or a month.

For in-store loans, repayment is made in person on or before the due date. If not, the lender processes the check or initiates the electronic withdrawal, including the loan amount and interest. Online transactions involve electronic withdrawals for repayment.

OTHER EASY WAYS TO APPLY FOR LOANS

Benefits of Payday Loans

  • Easy Approval: Quick and straightforward approval process.
  • Minimal Documents: Requires only essential documentation.
  • Instant Disbursal: Rapid transfer of funds.
  • No Collateral or Guarantor: No need for assets or a co-signer.
  • Straightforward Application: Simple and easy loan application.

How to Apply for Payday Loans

Here is a step by step guide on how you can apply for a payday loan

  • Visit the website or app of your chosen lender to apply.
  • Input necessary details: name, address, phone number, date of birth, and proof of income.
  • Upload scanned copies of required documents.
  • Provide bank details for fund transfer, often as soon as the next business day.
  • Receive an OTP on your registered mobile for authentication.
  • Carefully review and accept the terms and conditions.
  • Click Submit or Next to complete the application process.

Interest Rates on Payday Loans

Payday loans often carry high-interest rates, ranging from 30-50%, and some lenders may charge up to 2% daily, resulting in an APR exceeding 700%. This surpasses personal loan rates and credit card APRs.

Documents Required for Payday Loan Application

  • Identity proof (Voter card, Aadhaar Card, driving licence, utility bills, ration card, etc.)
  • Income proof

Disadvantages of Payday Loans

  • Short Repayment Tenure: With a brief tenure of 7 to 60 days, payday loans are unsuitable for those seeking longer repayment periods.
  • Exorbitant Interest Rates: Lenders impose high interest rates, with APRs surpassing 600%, especially impacting high-risk borrowers like those with poor credit or low income.
  • Limited Borrowing Amount: Due to its risky nature, payday loans offer a restricted borrowing amount.
  • Penalties and Credit Score Impact: Inability to repay within the specified period results in penalties and added costs, harming your credit score.
  • Risk-Based Interest Rates: Interest rates often hinge on repayment capacity, leading to elevated rates for high-risk borrowers.
  • Source of Regular Income Requirement: Eligibility typically demands a regular income source, primarily catering to full-time employees.

How Much Does a Payday Loan Cost

The cost of payday loans is generally $10 to $30 for every $100 borrowed, as outlined by the Consumer Financial Protection Bureau. For instance, a $15 fee on a $100 two-week loan results in a 391% APR. If not fully repaid on the first payday, additional fees are added, leading to a cycle of debt where borrowers may end up owing more in interest than the initial loan amount, making payday loans inherently risky and potentially expensive to escape.

What Happens When You Can’t Repay Your Payday Loan

If you can’t repay a payday loan, the consequences may include late fees or returned payment fees from the lender. Your bank might charge a non-sufficient funds fee. Some lenders offer a rollover option to extend the due date, typically with an additional fee. If the funds cannot be collected, your loan may be sent to a collections agency.

Conclusion

Securing funds in emergencies can be challenging for many without savings. Instant payday loans offer a solution, addressing short-term cash crunch.

It’s crucial to assess financial capabilities before availing these loans due to their high-interest rates and brief repayment periods.