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How Do Payday Loans Work

There comes a time in many people’s lives that they could use a little bit of extra money. Whether it is for car repairs, medical bills, or extra money for a move, you do need the money and you need to find a way to get it. The first thing that most people consider is a loan. While a personal loan is an option, you may not need a personal loan. Personal loans are often times have long repayment terms of at least one year. Some people may not have the credit to quality for a personal loan. This is where payday loans come into play. Before you apply for one, it is important to know how do payday loans work.

A payday loan is a loan that you can get for anywhere between $200 and $1500. The repayment schedule for a payday loan differs greatly from a personal loan. Most payday loan companies require that borrowers repay the loan within two weeks after receiving the loan.

There are a few ways to apply for a payday loan. The first is to go to a payday loan lending office to apply and go through all of the necessary steps with a representative in person. The second way is to call a payday loan lending company and apply for the loan over the phone. The third, and most common way to apply for a payday loan is to do so online. There are may sites on the internet who offer payday loans with similar interest rates.

During the application process you will be required to provide your personal information, such as name, address, telephone number, email address, and social security number. Next, you would be required to provide the lender with the status of your employment, the name, address, and telephone number of your employer, and the number of years that you have been with the company. You will also need to provide them with your scheduled paydays. Finally, you would be required to provide the lender with you bank information, including your financial institution, your account number, and your routing number. This information is necessary because if approved, the lender will put the money that you borrow directly into your account.

After you have received your loan, you will typically have two paychecks before your loan is due. In the case that you cannot afford to pay the loan back after two pay periods, you can request an extension. While you will be granted a week extension, the interest rate will go up for each extension that your request. It is best for you to pay off the loan when it is due to prevent future fees.

When the loan’s repayment is due and you do not request an extension, the payday loan lender will automatically remove the funds from your checking or savings account, depending on which you requested. If you did not request an extension and the funds are not in your account, you risk overdraft fees from your bank, returned check fees from the payday lender, and in some cases, another weeks worth of finance charges.

One important thing to understand about payday loans is that the interest rates are extremely high. Many payday loan companies offer a 39% interest rate. This means that if you borrow $500, you would be required to repay around $695. If you request an extension for an extra week, you would end up paying $890. This is the reason that payday loans should only be used during a financial emergency.

While payday loans are excellent ways to get out of a temporary financial jam, it is important to understand everything there is to know regarding payday loans before you apply for one. You do not want to dig yourself into a bigger financial hole than you are already in.