Payday Loan, Cash Advance

Learning More about Payday Loans and Cash Advances
A payday loan is a form of a micro-loan where debtors should be able to seek financial assistance for as low as $100. This type of micro-loan is also a short term loan since the due date is often two weeks or, as the name suggests, on the next payday. Paydays loans are often very easy to obtain, debtors can access the funds in less than 24 hours. Some local payday loan companies even provide the funds in cash within hours from initial transaction. These companies simply need to know that the debtor is employed and the salary is more than the amount asked.
Payday loan is often the preferred loan of individuals who wants to access cash as soon as possible. Some just needs a few hundred dollars until the next payday in order to pay for their basic necessities. Credit card companies also allow cash advances but the rate could be higher. This type of loan is also preferred by many individuals since the transaction is very simple. Online payday loan companies do not even ask for any documentation (faxless) and they can still provide the funds in the debtors preferred bank account.
Advantages of Payday Loans
The main advantage of payday loans is the lack of credit check. Traditional lending companies will always conduct credit check to ensure that their possible debtor doesn't pose any risk or troubles for collection. Credit check will usually disapprove loan applications of those who have bad credit rating. Without any credit check, debtors who have bad credit rating should be able get the loan fast.
Another advantage of payday loan is the simplified transaction. As already indicated, payday loan companies do not require a lot of documentation. The usual documentation is only a proof of employment (I.D.) and salary stubs. Some may call the employer to know the length of employment but if you're a returning customer, they will approve your small loan fast. For online payday loan companies, they will check your information through background check applications and calling your employer.
Other debtors prefer to deal with payday loan companies because it allows them for a small loan. Traditional loans often require you to ask thousands of dollars. With payday loan companies, you can ask for a few hundred dollars. Because debtors can keep their principal loan low, they can easily pay the loan on the next pay date.
Disadvantages of Payday Loans
With all the advantages of payday loans, there are still disadvantages that discourage many individuals from opting for this type of loan. One of the well known disadvantages of the payday loan is the interest rate. Payday loans companies consider their loans as high risk form of loan. Because of that assumption, their interest rate can go as high as 25% and the least interest rate is 10%. Some debtors thought that this is a monthly interest rate. Payday loan companies post their interest rate for 15 days (some 14) only. Here's an example: If the principal debt is $100 on the first day, the payment on the 15th day (the due date) will be $125.
Another disadvantage of this of loan is the possible bank problems. Paying your debt to the payday loan company is actually on check. Many payday loan companies will require their debtors to sign a postdated check that should be cashed-in on the due date. This can easily create problems if your salary is not deposited in your bank in time. Payday loan companies will try to extract some funds from your checking account but since there are no funds yet, you'll be charged with overdraft fees. Because of the overdraft fees and the high interest rate, some states have even banned operations of payday loan companies as they can be very aggressive when it comes to collection.
Avoiding Scams
Scams in payday loans can happen and they can be usually experienced in online payday loan companies. The transactions in online payday loan companies are based on bank transfers. They payment is made through ACH which allows the payday loan companies to automatically deduct the loan from your checking account. Aside from the possible overdraft if you don't have any funds available, the payday loan company may remit more than the amount you owe with the interest rate.
There are also companies who will harass their debtors into paying more even if they have already made their payment. This can happen in local and online payday loans. They could send the debtor's information to a collection agency which will constantly call the debtor or even the debtor's employer just to intimidate the debtor into payment.
Choosing the Right Payday Loan Company
If you really need cash and you don't have a lot of options, a payday loan company could give you the help you need. But not every payday loan company is the same. As already indicated, some companies can just get your money from your account without any permission.
To ensure you're dealing with a reputable or trusted payday loan company, start with your local payday loan companies. Online transactions can be dangerous especially if you're not familiar on how payday loan companies work. With local payday loan companies, you can be assured that they are legitimate.
If you really want to deal with online payday loan companies, you can check the BBB (Better Business Bureau) website. Many payday loan companies provide their direct link to BBB so you can check their profile. It's also a good idea to do a simple research on the website as many reviews (especially bad experiences) can be posted online.
Last but not the least, double check if you are allowed to do business with payday loan companies. As already indicated, there are states that do not allow this form of financial transactions.
Cash advances through payday loan are a good option for financial assistance for the employed. However, it's important to know the disadvantages and possible drawbacks of this type of loan to avoid further financial problems that can happen from payday loans.