As per one of the latest studies, twelve million American adults have been using cash advance payday loans annually, more than 5.5% of adults using it in the last five years.
Most of us at some point of time suffer from a cash shortage. While there are planned expenses, there are occasions when an unplanned expense comes up requiring immediate attention. It does not give any room for delaying or adjustments. At this point of time, it’s the cash advance payday loan which comes and help the people to survive turmoil situation.
These loans provide immediate cash and suitable for people who have a regular income sufficing only planned expenses. One of the advantages is that it provides credit to those people to whom the normal bank would not be funding credit. It helps them to solve a temporary cash flow problem with an underlying contract specifying the payment of this loan amount by the next pay cycle.
Cash advance payday loans have created a big market for itself in the recent times. This product is able to provide customer the ease of securing money and a quick solution to an impending financial situation.
Cash advance payday loans – Short term Credit Product
The loan works on the premise of the promise to be repaid by the borrower by the next pay cycle. However in case of any unavoidable situation, the lender generally agrees to extend the term of the loan. The same comes at the cost of adding on to the rate of interest or penal charges on the outstanding loan amount.
If you want to apply for payday loans, you should fulfill all these conditions
- You should be a permanent citizen of the United States.
- Your age should be at least 18 years so as to qualify for the cash advance payday loan.
- You should be employed and earn a minimum of $1000 per month on a fixed date.
- You should also not be in a bankruptcy situation or a defaulter with any other credit since all the cash advance payday lenders do a credit checks with data from multiple credit agencies like Experian, Trans-union etc.
An ordinary credit score is usually not a deterrent in the credit approval. But a really poor credit history of multiple defaults does not permit the lender to go ahead with the approval of such loan.
These loans do not have an amortization cycle that each payment has some of the principal component along with the interest accrued on the loan amount. Instead there is a fixed charge on the loan which has to be repaid along with the full principal of the loan amount. The APR of the loan can vary from lender to lender but the nature of repayment stays the same. All such calculations and penalties are informed to the customer at the time of applying for loan.
A borrower in case of having any financial difficulties can approach the lender for an extension of the loan. The lender can renew the contract and recalculate the interest. He also has an option of changing the rate of interest as per the renewal of the contract. Most of the lenders do not allow multiple renewals or extensions can keep this cap at the count of four. The higher the renewals are, the more the chances of customer default is the key understanding here.
Any default by the customer has multiple implications for Online Payday Loans Application
- He may end up in paying higher rate of interest or penalties.
- The customer is also exposed to the risk of loss of credit score.
- Lender may choose to inform the credit bureaus of the defaults in the loan which can hamper the future borrowing capacity of this customer. However once the customer clear off the dues, the credit rating agency updates the records showing the loan closure.
- Lender can also resort to selling of this bad loan to an external debt recovery agency. This agency can use multiple ways from soft collection techniques like reminders, SMS, emails and calls etc. to hard collection techniques involving court and law procedure.
A cash advance payday loan is a very useful product if it is taken for the right reason and repaid back at the right time. One should keep in mind all pros and cons of it, before applying for loan. Also, one can consider borrowing some help from friends and family. You should check all options available and then take a wise decision!