Pays received every month may seem short when too many bills are outstanding or major expenses are on head to incur. The creditors may not like to wait till the debtor receives the next cheque and higher interest charges might be the case for debtors turning to arranging some sort of short term finance.
Payday loans are one such short term borrowing options for those who don’t prefer to wait till the next cheque arrives. How does it work then?
One can say that the loan proceeds of payday are granted on the basis of strength of the pay cheque to be received. It can be equally or lesser than the regular pay received by the borrower. Usually these loans are offered by the private lenders and they don’t carry out any credit check of the consumers. What they are interested is only a blank cheque in advance!
The unfortunate part of the private lenders in business of payday loans is that they charge enormous interest rates (called usury) on these short term borrowings. This may endanger the financial position of the borrower and possible debts may be invited. The interest rates may vary to certain hundreds to thousands percentage. Even the Annual percentage rates (APRs) designed by the state may not be favorable to the borrowers.
It is advisable to first check into the interest rate offered by the lender and then enrolls in the payday loans. If possible, one should shop around for different lenders and also negotiate. Even better option is to search for a bank that provides payday loans. For example, recently major Florida banks have started offering payday interest rates. Though these payday loans are also carrying higher interest rates they might be cheap compare to private lenders.
The payday loans are governed by the state. Federal government hardly intervenes in the operations. The regulations are different from state to state and it may be like the payday loans are allowed only for 30 days. Rollovers or extensions are totally restricted. Only one payday loan per borrower is allowed at a time. Lenders might be restricted to charge additional fees apart from interest if customers fail to pay the proceeds on time. There shall be a mandatory 24 hours cooling off period between loans.
To practice the payday loans in the state the state government may require the lenders to register their business and take a license. Hence, customers shall certainly ask for licenses to check the legitimacy of the lender’s business.
If one wants to avoid taking such higher interest rate payday loans he can get the temporary finance from friends and family or use credit cards if already have any. However, the situations of the borrowers who enroll in the payday loans are not always that powerful to think about any other option. On the other side, the payday loans no credit check are applied and received within a span of only 48 hours which seems quite logical when cash emergencies are aroused.