What are Payday Loans?
Payday Loans > Payday Loan Articles > Article: What are Payday Loans?If you find yourself facing an unexpected financial emergency that must be addressed immediately, such as an automobile repair, medical emergency, or other unanticipated expense, you may have considered applying for a payday loan. A payday loan is a short-term loan designed to help borrowers meet an urgent financial need by providing instant access to cash. Also known as payday cash advances, cash advance loans, or deferred deposit cheque loans, these short-term loans are growing in popularity among borrowers who need instant access to cash but lack the credit to obtain traditional financing.
Payday loans are an effective solution for borrowers who need cash now to address an immediate financial need. Payday loans are particularly attractive to borrowers with less than perfect credit because payday loans require no collateral or background checks. Instead, payday lenders secure their loans by obtaining a post-dated cheque from the borrower. The lender will hold the post-dated cheque until the borrower's payday, at which point he will deposit the cheque to pay off the loan.
How Do I Obtain a Payday Loan?
The first step in getting a payday loan is to research lenders. Payday lenders generally charge higher interest rates than traditional lenders; however, you can still shop around to find the best deal on a payday loan. You can also save money by comparing each lender's fees, terms, and conditions. By doing your homework, you can ensure that you'll Compare low rate payday loans at the lowest cost.
Once you've found a quality payday lender, you'll need to apply for the loan. The eligibility criteria for payday loans are minimal. To qualify for a payday loan, you must:
- Be an Australian citizen
- Be at least 18 years of age
- Have verifiable, regular employment (and paycheck stubs to present)
- Have had a valid bank account for a minimum of three months
If you meet these four criteria, you are eligible for a payday loan. Many payday lenders have fax-free applications that borrowers can complete online in a matter of minutes. You can also complete a payday loan application at the lender's store or office. Once the loan application is completed, you must wait for approval. Approval can be granted in a matter of hours, and generally takes no longer than one day, although speed will vary from lender to lender. Some payday lenders will even give you same-day access to the money, provided you complete the application early in the day.
Once the lender has approved your application, the funds are deposited in your bank account or made available at the lender's store. You can then use the payday loan funds as you see fit. The loan is repaid when the lender cashes your post-dated cheque, after your next payday. If you have to extend the loan to repay the debt at a later date, you will most likely have to pay higher finance charges and additional fees.
Payday Loans are Not a Long-Term Solution
It's important to understand that payday loans are not appropriate for an extended financial crisis and should not be used as a tool to live beyond your means. Payday loans should not be confused with other traditional loan products. Payday loans are intended to be paid back quickly and should not be used as a solution to a long-term financial problem because they carry high rates of interest. Furthermore, payday lenders often charge steep fees and outrageous interest charges if the loan term is extended beyond the original agreement. Even if you intend to repay the loan within the original timeframe, you should understand the extra costs associated with extending the loan. If a payday lender is hesitant to share details about their fee rates or other costs, walk away.
Watch out for Hidden Fees and Costs
Prior to entering into a loan agreement with any lender, you should understand the terms and conditions of the agreement. Most importantly, you should determine what the lender's policy is for extending the loan period. Does the lender charge a higher interest rate or fees for extending the loan term? Many payday lenders will assess steep charges for loan extensions, so you should understand these terms before you sign. Even if you intend to repay the loan within the original timeframe, you should understand the extra costs associated with extending the loan.
Payday loans are a great short-term solution to get out of an immediate cash crunch, especially when used responsibly. Quick approval, instant access to cash, and few qualifications make it easy to get the emergency financing you need fast with a payday loan.
What to do next
Finance Comparison lists a number of highly competitive payday loans that you can apply for online. Simply compare rates, terms and apply online.
