The financial situation in any home or individual pocket largely determines the spending capacity and ability to meet with sudden expenses. A number of times, the need arises to look for additional financial help either toward the middle or the end of the month. The need could arise to pay fees, meet with sudden medical expenses or increased bills. Identifying this need and urgency, a number of private and co-operative funding institutions designed what is called a 'pay day loan'.
A payday loan is a personal loan. It is an amount forwarded to the borrower against the next salary check. This is a short-term money advance that does not exceed a certain predetermined amount. The idea is to help the borrower to handle expenses until the next payday. These loans are also called cash advances and are especially helpful in the case of a bad credit history. The payday loans could be availed to meet any personal commitments against the salary check, unlike the cash advances that are also provided against a credit card. The rules and regulations applicable to the loans differ from one state to another.
Bad credit is a situation rather than an epithet. The situation arises when finances and especially expenditures are not monitored well. It refers to outstanding payments that surpass income. The situation could arise out of outstanding credit card payments, home rent or payment towards important utility services. A person with bad credit is also rated badly by the credit bureaus. The rating does not affect the home or profession as much as the non-availability of funds when required. Payday loans for bad credit are secured loans that enable many such borrowers to take care of family commitments or office requirements. The small amounts rid the borrower of major headaches. The payday loan is unique in the fact that on your next payday, whether you like it or not, the loaned money is debited into the lender's account.
The process to secure a short-term loan or a payday loan is hardly different from the procedure applied to other loans extended. Though the APR or annual percentage rate differs from one lender to another, the restrictions on exact payday handouts are few. The repayment is calculated for the short-term payday loans pretty much like other loans. The governing factors remain - amount sought, percentage of earnings dedicated to social commitments, rate of interest applicable and the time of application. However, the difference between the APR and the EAR or effective annual rate of interest can be substantial. The borrower ideally visits a payday lender online or offline. The cash loan is secured against a full repayment from the borrower's next paycheck. The finance charges applicable on payday loans range between 15 and 30% for a fortnight. The borrower is required to hand over a post-dated check that covers the payday loan fees and the entire amount borrowed to the lender. This ends communication, at least for a fortnight. The borrower is expected to repay the loan in person on the day appointed within the agreement.
When attempting to secure a payday loan, the borrower is expected to produce certain documentation and evidence of steady income. This is accepted in the form of one or more pay stubs, recent bank statement and even letters from employers in certain cases. There are many resources that have enumerated the requirements of the different lending institutions online. This enables borrowers to assimilate the required documentation and apply for a bad credit loan in a structured and organized manner.
The payday loan -- like other loans -- has its own implications. However, if the savings or banking account of the borrower is short on funds, the borrower is liable to be charged a bounced check fee along with the cost of the loan. In this eventuality, the borrower incurs the addition of fees as well as increased rate of interest. In certain states, the members of the National Trade Association can offer an extended payment plan to a case of bad debt.
