Pay Day Loan: A complete solution for short term finance crisis
A payday loan is a loan for short term. It is a kind of insecure loan. These loans are lent on the high rate of interest. It is done on the basis of agreement between the borrower and the lender. The borrower makes the payment by the post-dated check mentioning the amount including interest.
The lenders can encash the cheque on the agreed date as per the agreement. Pay day loans are known by many names like salary loan, payroll loan, small dollar loan, short term loan, cash advance loans. These loans are given on the basis of previous advance and records. The payday loan legislation varies in different countries, state, and provinces.
Howe rate of interest is charged on such loans?
Many lenders charge the high rate of interest on these short-term loans and to prevent usury many norms are implemented. In the United States, as per Uniform Small Loan Laws annual rate of interest can be maximum 40%. The annual rate of interest calculation is very different. It can be nominal APR and it can be effective APR.
Features of pay day loan
Pay day loan is for a short period time. However, the size and the rate of interest of the pay day loan are limited by the state law.
On the borrower’s next pay day, a loan is repaid or borrower can pay before time if he/she receives the pension or any security fund.
The borrower repays the loan in the form of the post-dated cheque. The ETS services that are authorization to electronic debit from the bank can be done. If a lender does not receive the amount, the lender can encash the cheque or electronically withdraw electronically before or on the pay day loan date.
Just like other loans lender can lend money only if a borrower can meet the financial obligations.
The loan period can be between two to four weeks. The date is pre-decided and mentioned in the agreement. The loan can be sent in form of cash, cheques, ETS, or by prepaid debit card.
Recent trends in payday loan
The lender provides the unsecured loan to the borrower. Traditional after the verification lender provides the amount and in some cases, the loan is lent without any verification. In the recent years, many companies provide payday loan services online. These companies have their own underwriting criteria. In this borrower complete the loan application form online and scan and upload the original documents. After verification, funds are transferred to the borrower’s account. There are the varieties of best online payday loans available online. The borrower that is the company electronically withdraw the amount on the borrower’s next payday.
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