Payday loans are a type of short-term loan that can be used to cover unexpected expenses or to bridge a financial gap between paychecks. These loans can be convenient, but it's important to understand the different features and terms before taking one out.
Ease of Qualification
One of the main features of payday loans is that they are relatively easy to qualify for. Unlike traditional loans, payday loans typically have fewer requirements for qualification.
This is because the loan amount is generally small and the repayment period is short. To qualify for a payday loan, you typically only need to have a steady income, a bank account, and a valid ID. That's much less information than a mortgage, which can take weeks to be approved for, requires.
Another feature of payday loans is that they are approved quickly. In most cases, you can get approved for a payday loan within a few hours or even minutes. By using automated systems, payday loan lenders can process loan applications quickly. That means you can get the money you need quickly.
Few other options grant access to cash as quickly as payday loans do.
Increased Interest Rates
While payday loans come with higher interest rates than some other loan options, there are reasons why these loans have the rates they do. Unlike a mortgage or car loan, a payday loan is unsecured against debt. They're also approved quickly and are underwritten for only a short time frame.
If you need longer access to capital, there are other loan options. If you only need money for a few days or weeks, though, a payday loan may be your best option. Even if its interest rate is a bit higher, you won't pay the interest for long. You also can avoid some fees that other loans have.
Short Repayment Periods
Payday loans have a short repayment period, typically between two weeks and one month. This means that you will need to pay back the loan in full, including interest, in a relatively short amount of time. The short time frame limits how much you pay in interest on the loan.
Many payday loan lenders will require you to set up automatic payments from your bank account. This means that the loan payments will be automatically deducted from your account on the due date. Most other loans also allow automatic payments, and a number of other lenders likewise require automatic payment enrollment.
Contact a payday loan lender to learn more.
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