Differences Between Payday Loans
Although payday loans can be a lifesaver when the situation calls for it, some payday loans can be dangerous and downright unwise. In this article, we will discuss the dangers of payday loans as well as what you can do to avoid becoming a victim. Payday loan companies often require borrowers to put up collateral against the loan, which can be your car, home, or other property. If you don’t pay your payday loans on time or the company is not able to get their money back, they can take your collateral.
Borrowers must understand the APR
Annual Percentage Rate, as well as the fees and late charges associated with their payday loans. Many states have outlawed payday loans altogether because they have high-interest rates and fees. In some states, payday loans can even be illegal. Payday loan interest rates can be quite high, sometimes topping 500% of the original loan amount. They are also often tied to an annual percentage rate (APR), which means the more the loan is borrowed, the higher the interest rate.
Payday loans may be used for a variety of purposes
such as bill consolidation, emergency debt consolidation, travel expenses, and many other purposes. One must realize, however, that these are “unsecured” debts. As such, many borrowers risk losing their home or other property if they fail to make their monthly payments on time. Payday loan fees and penalties can also be steep.
If a payday loans lender
is going to be trusted with one year’s debt, they will want to see some kind of proof that one year’s worth of payment on the loan is indeed possible. Most lenders will want a check stub from one year of employment. Most borrowers will be asked to provide proof of income and employment with a bank statement, a pay stub, and so on. This paperwork may be sent electronically over the internet.
The most common method
that lenders use for verification purposes is to simply ask the applicant to write a post-dated check for the full amount of the loan. The lender should then send the check to the applicant in about 2 weeks. Some lenders, however, also offer an electronic transfer of funds that does not require a post-dated check. Electronic transfers are usually processed within a few hours. There are also loan providers who do not allow electronic transfers but will instead require a paper check to be mailed to them along with a signature guarantee.
There are many differences between all the different types of payday loans
The main difference between all the different types is the interest rate that the payday loans lender will charge. For this reason, it is important for the borrower to carefully research each company that he or she is considering. With a little comparison shopping and by asking questions, borrowers will ensure that they get the loan amounts that they need without falling into the traps of predatory lenders who take advantage of vulnerable borrowers.