Have you noticed how loan offers can be found everywhere today? There is a tremendous growth in the lending industry, but we could see the most explosive growth in the internet. Online loans have made a great deal of impact on the lives of people and this is especially true in connection with payday loans.
Payday loans are loans that are taken against the paycheck of a borrower. These loans are normally paid in full, together with fees and interest on the next payday of the borrower. Ideally, they are only short term loans intended to assist one through a sudden need for cash that cannot wait until the next payday.
The fact that payday loans are available online makes it very convenient for many consumers. But aside from that, it has many other qualities that make a lot of people consider it as a top option when they are in need of quick cash.
How Payday Loans Work
Before the internet, payday lenders operated through storefronts where a consumer could walk in and file a loan application. The lenders would usually ask for post-dated checks that would cover the full loan amount and the interest, dated on the payday of the borrower. On the date when the loan was supposed to be paid back the borrower could pay the loan amount and retrieve the check or just allow the lender to cash the check. When the payday lenders started going online, many of them dropped the use of checks. They started using direct debit payment instead.
What Are the Benefits?
The most obvious benefit of an online payday loan is that it allows a borrower to get cash quickly. Because the whole borrowing process is done online, it can be done any time just as long as there is a computer and an internet connection available. Payday lenders have also been trying to cut down on the processing time for cash advance loans. A borrower has a good chance of getting the needed money within 24 hours of filing a loan application. Many online lenders claim that they have cut down the process to a few hours. That quality makes this type of loan ideal for sudden cash needs.
Another benefit of online payday loans is the lack of too many requirements and documentations that typically slow down the processing time. Payday lenders generally require borrowers to be of legal age, employed for a certain period of time and have a bank account. Most of the time, borrowers would not have to submit any documentation to back up their loan application. But this would depend on the area where the borrower is living. Some states require that they should submit supporting documents and that would have to be done through faxing the documents. Generally the payday loan process is faxless, which, makes it convenient to a lot of people.
The Negative Side
If you are aware of payday loans, then you should have also heard about the things being voiced out against it. Payday lenders are under fire right now because of the controversial nature of their product.
One negative aspect which isn’t really controversial, but something that you should still keep in mind, is the fact the amount that you can borrow from payday lenders is limited. The average payday loan would only amount to a few hundred dollars. If you need money that’s larger than that then you better start looking for some place else.
But the most negative aspect is the fact that it is very expensive. The term “very expensive,” is not an exaggeration. The high cost of payday loans has caused the financial ruin and trouble of so many consumers. Just how expensive are cash advance loans?
The best way to measure how expensive they are is to compare them with other forms of credit. Lenders would charge interest to the borrowers in order to earn money from the transaction. This can be measured in APR or the annual percentage rate of a loan. A typical loan that you can get from a bank or other traditional lender would have an APR of about 7%. A typical credit card APR is around 12% and some people consider that to be expensive. Now, a typical payday loan would have an APR of about 400%. That’s not a typo, that’s really 400% and we are talking about the average here. There are cases when the APR charged by the lenders has gone many times higher than that. Now you know why payday loans are considered to be expensive. Sounds crazy, but it’s true and millions of people are still using payday loans every year.
Laws and Regulations
Don’t be too alarmed though. There are many states that have laws in place concerning lending. These laws define how much lenders can charge. These are usury laws. Some states have even gone so far as to enact laws that regulate the amount that payday lenders can lend to borrowers and the number of times that borrowers can use the loan. The state of New York has even banned payday lending completely. Lenders however can get around these state laws by partnering with banks that operate within certain states.
You should be aware of what your state law says about payday lending if you are planning on using it. You should also read the fine print on the terms and agreements of the loan before you sign it. You don’t want to miss anything that you might regret later on.
Should You Use a Payday Loan?
Now that you know more about faxless payday loans, the question is whether you should use it or not. Before you take the necessary steps for applying for a loan, take a step backwards and assess yourself whether you really need the loan or not. Think whether the need for cash is really an emergency situation or not. If it is not an emergency situation that should be resolved at all costs, then you might want to think of the alternatives that are open to you. There are many alternatives that you can use in order to get the cash that you need. These alternatives are not as easy to get and use as payday loans but you can be sure that they are cheaper.
Using your credit card for a cash advance is one good way to get money quickly. It would also be cheaper than using payday loans. If you have any savings then it would also be a good idea to just use the money that you have saved instead of using an expensive loan. That would save you from a whole lot of trouble in the long run.