What are Online Payday Loans?
Online payday loans are loans from an online lender for a short term typically sixty days or less for a high interest rate. Rates can range from 260.00% and 780.00%.
Consumers can get $100 – $1500 without the hassle of a credit check or a bunch of paperwork.
There are many names for these types of loans, “Paycheck Loans”, “Payroll Advance Loans”, “Cash Advance”, and “Check loans”. Basically all loans are to be repaid on the date you receive your paycheck.
How it works
The borrower applies for the loan online providing some basic information. Most lenders require the following:
You must have been employed or receiving income for at least three months.
Your paycheck must be directly deposited into your checking account.
You must have total monthly income of $500.00 or greater.
You must have an active checking account open for at least three months
You must be a United States citizen and be at least 18 years of age.
Some lenders offer loans based on government benefits, like Social Security or disability payments in lieu of employment. Lenders agree to deposit $100 – $1500 into the borrower’s checking or savings account. The borrower agrees to let the lender debit their account in the future (most often their payday), and lenders receive their fee (typically $10 – $30 per $100).
Pros
Most Online Payday lenders make it very quick and easy to get a loan. They can get you the cash fast. It is easy no matter what your credit is like and that makes getting a loan very appealing to borrowers. Most approvals are instant; some approvals may take up as little as one hour. You could receive your funds in a few minutes, or less than 24 hours. They extra benefit of an Online Payday loan is that you could apply for the loan any time you wanted to in the privacy of your own home at your computer making it very easy for any one to apply.
Cons
These loans are also known as “Predatory Payday Lending” or, “Loan Sharking”. Before making a loan, legitimate lenders assess the ability of potential borrowers to repay it. Payday lenders do not. In fact, their business is built on making loans borrowers cannot afford to pay off, so that they will keep coming back and paying repeated fees on the same small amount of money borrowed.
Payday Loan Alternatives:
Most financial advisors would tell you to have an emergency fund set up to avoid having to turn to anyone, including online payday lenders in the event of an emergency.
Some employers offer cash advances and you could request one. Even a cash advance on your credit card holds a lower interest rate than an Online Payday loan would.
Another option would be to seek the advice from a qualified credit counselor. These services are available at little or no cost. Finally another alternative would be to look into emergency assistance programs in your area.
The bottom line
Online payday loans are expensive and hard to repay once you start them. If you are considering getting an online loan weigh your options carefully and know what all the fine print means. Look into other options before you consider an online payday loan. It is easy to fall into a debt trap and very hard to bail yourself out.