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Payday Loan - What Is It and How It Works

Written By emilie dane on Sunday, February 24, 2013 | 5:00 PM


Sometimes, an immediate need comes up and people find themselves short of cash, unable to meet that urgent need. Normally, the next logical step is to borrow from relatives. If the relatives are unable to help, people turn to friends. However, in so many instances, borrowing money from relatives and friends cause more harm than good. It has been said that "if you want to keep your friends, never borrow money from them". This is a sad statement, but true.

For this reason, when there is an urgent need for funds, the counsel is to look for better options. One such option is getting a short-term loan such as payday loans.

Payday Loans Defined

In Australia, payday loans are also called fast cash loans. For people in dire need of immediate cash, this is one of the quickest ways to access the much needed fund. As the name suggests, this is a short-term loan that will be paid within the next 15 to 30 days from the time the money was borrowed.

How Does a Payday Loan Work?

It's really very easy to apply for one. Initially, all you need is a pc and an Internet connection. With this, you can browse the Internet and look for lending institutions nearest you that offer payday loans. Find out what their requirements are.

Generally, when you have chosen a lender, and as you enter their website, they will require you to provide them with some basic information about yourself. This information may include the following: your name, your address, your date of birth, and then your employment and income details.

Some of the requirements you have to meet in order to qualify for a payday loan are the following: You must be over eighteen (18) years old; you must be an Australian citizen; you must be currently employed; and you must have an active working bank account.

Lending institutions particularly look into how much is your current income. They do not really require a very high income, but what they want to se sure about is that you will be able to meet your obligation from your income. Most lending institutions offering payday loans require that your income be at most $400 per week, net after tax. As a proof, they will require you to submit a pay slip which shows how much your income is per week, or per month.

What If the Applicant Has Bad Credit History?

Institutions offering these loans hardly perform credit checks. This is primarily the reason why this type of loan is very popular to people who have bad credit history, poor credit rating, or those who have been turned down by bigger lending companies. What is crucial when applying for a payday loan is that the borrower meets all the basic requirements, as stated above.

Advantages and Disadvantages of Payday Loans

Payday Loan is the perfect answer for urgent cash requirements. It's very easy to avail, requirements are low, no credit checks, you will receive the money immediately, and you can borrow from $200 to $1,000.00.

There are, however, some disadvantages with payday loans. With this type of loan, loan term is very short, between 15 to 30 days only. It also has high interest rates.

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