Mar 16, 2012

Payday loans for a first-time borrower

Pay day loan is a non-secured (or secured by a person’s next paycheck) loan. A classical payday loan is available for a person that has regular paychecks. In the past it was usually given in a form of post-dated checks with the loan amount plus interest and fee included. If the person didn’t have enough funds on the account on the due date, the check bounced and the debt was increased on a check bouncing fee. Currently online payday loans are a much more convenient way to borrow small money for a short period- you just fill the application and in 1 hour (sometimes on the next day) the money are on your checking account . Typical payday loan amount is about $300-$500. The length for the loan is usually a one-two weeks, sometimes 4 weeks to accommodate to those who receive monthly salary.

Requirements for a payday loan

To qualify for a payday loan a person should only have a regular job with a minimum wages, proof of state residence and a checking account. No other financial product can be received as easy as payday loans.  Online payday loans usually have the following requirements: 18 year old and older, have a job with at least $1000/month salary, have a phone number and a checking account that was active for at least 3 months. When you fill an application online you are usually asked for your name, home address, your job information, and your account information.

Situations when payday loan can be used

Payday loan should be considered as a last chance borrowing when banks and other lenders refuse to lend you money. Typical situations when payday loan can be necessary:

  • Your car is broken and needs to be fixed urgently. You need several hundred dollars before the next paycheck and you are 100% confident your paycheck will have enough money to repay the loan.
  • Your need to pay a rent or other important bill immediately. But you still have confidence in receiving your paycheck soon.
  • You face a medical emergency or a medical problem than needs to be addressed immediately. Actually that is the most common situation when payday loan is
  • Vacations or some unexpected events. It’s your decision of course but is it really so urgent and necessary?
  • Your home needs urgent repairs. In this situation you usually can wait – maybe consider making repairs after you have enough funds.

When payday loan can be good for you

Applying for a payday loan online is an easy and quick process, but you should better understand  what are the pros and cons of this financial product before making your move.

If you have a credit card with an unused credit limit it will be usually cheaper for you to borrow money from your credit card account. Even taking money from your credit card in an ATM (that is called credit card cash advance) can be cheaper despite higher rates, fees involved and other cash advance complications (see credit card and payday loan comparison below). But be advised that if you will not have sifficient funds on the due date you can face serious problems and additional fees.

If you have a debit card with not sufficient funds on the account you can use debit card overdraft to finance yourself. Average overdraft fee is between $30 and $35. For the small amounts it can be more than a payday loan fee, which is restricted by $10 -$15 for every $100 of a loan in some states. For example if you borrow $300 payday loan will cost you additional $30-$45. If you need to borrow less than $300 payday loan can cost you cheaper.

Any type of  personal loan from a bank will cost less for you. The only serious drawbacks of bank lending are credit checks (that a person with bad credit will not pass), time that takes your approval for a bank loan and paperwork needed to be done to get a loan.

So if you are confident in you source of income and chose the speed and convenience of a payday loan you can apply for a payday loan online.

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