Payday loans are small-dollar, short-term, unsecured loans that borrowers promise to repay out of their next pay-check or any other regular income payment that they might have. Such loans are usually priced at a fixed fee, which represents the finance charge to the borrower. Typically known for the very short time to maturity, the cost of borrowing are often known to be very high – ranging somewhere from 300 percent to 1,000 percent, or more as an annual percentage rate. How the system normally works is that the borrower usually writes a post-dated personal check in the amount they wish to borrow plus the fee in exchange for a certain amount of cash, now. The lender holds onto the check and cashes it on the agreed upon date, usually the borrower’s next payday. Thus due to its nature, these loans are also called cash advance loans or check advance loans.
One of the biggest problems with regular lending institutions is the fact that the time between the perspective borrower starting the process and them eventually getting the money is exceptionally long. This is understandable as well, since banks and lenders have to do their detailed due diligence before they make a decision as to the particular application for a loan. This diligence includes background checks, credit history checks that take up a decent amount of time. So, if the person applying for a loan is really strained for time, this isn’t exactly the best possible route.
Most Payday loan companies on the other hand have exceptionally swift processes when it comes to determining whether the loan can be made out or not. The major requirements revolve around the personal details of the applicant, i.e, name, contact, monthly date of pay etc. The process of submission hardly takes 15-20 minutes, and as such the application reaches the company no more than 30 minutes after the person initially got hold of the company online. Most of the payday loan companies have websites that are exceptionally easy to use and navigate, making the overall very easy and simple for the applicant. Once the submission has been successful, work at the company’s end begins nearly instantaneously, and within days the loan is granted to the applicant (Given that the information provided checks out, and there isn’t criminal activity associated with the person applying)
The payday loan system works on the idea that access to finance shouldn’t be limited to people who have proper credit histories – It is a fact that the majority of people worldwide are unbanked, and don’t have credit cards against their names.. So, whenever they are in need of some quick cash, they just can’t do anything about it. This is where these quick, payday loan companies come in handy. Using minimum time, they process people’s applications and provide their decisions back to the applicants. If successful, the money is handed over to them, if not, the person moves on to other possible avenues of cash.