How much does it cost to get a payday loan?
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A payday loan allows a person to borrow a small amount of cash to those who are employed, but have a bad credit. Payday loans, also called as payback loan are typically less than $500.
On the other hand, however, it is the most expensive way of leasing money. If a payday loan is not repaid on the first day, it adds a new finance charge and the cycle keeps repeating. If not able to pay, the person who borrowed the money can end up owing double the amount he leased.
Short term lending is subject to federal and state laws, such loans work differently in every state. They may be called deferred deposit, cash advance, or deferred punishment.
How do they work?
A lender will check your account and income details before providing you the cash. Payday loans are mostly leased to those who have a stable income, or all employed on security basis. Once attested, it takes less than 15 minutes to process through online or electronic transfer.
In exchange to the cash, a lender would ask the employee to sign a permission check to automatically withdraw money from your account on the day of repayment. The loan is provided for minimum two weeks or maximum one month. If the money is borrowed at a store, the borrower commits to meet at the store on the appointed day. In case the borrower does not show up, the lender will increase the rate of interest.
Online payday loans can also be initiated through direct payday lender. It automatically makes decisions about brokers, loans and interest and sells the information to the highest bidder.
How much can you borrow?
Thirty-two states permit payday lending.
The highest amount of payday loan is $1,000 and the lowest amount leased is $300 in California. The most commonly leased amount is $500. There are a few states which limit the amount of a payday loan to 25% of the total income of the borrower. It is usually impossible for a borrower to get approved for a higher amount than his income, by law. A payday lender always analyses your income and expenses before releasing the loan and deciding the amount of loan leased to you. Loan that is less than $350 is to be repaid within two weeks.
What do you need to apply for a payday loan?
To qualify for the payday loan, you basically need an active bank account, a proof of your income and an ID card. A good credit is not required to be eligible for the payday loan.
What lenders check is a safe flow of income. Nonetheless, a lender can reject your application for a payday loan because of the following reasons:
- Your monthly income is less than $500. Some lender require a higher amount of income for safety.
- You don't fit into their requirements of repayment. Many states have different laws, which limits your spending of your income. Every lender uses his own calculator to determine whether or not you can repay.
- You are already registered for another loan. Companies can track your previous loan details in real time.
- Your checks bounced recently.
- You recently were bankrupted.
- Your bank account is too recent.
How does dost it cost to get a payday loan?
The cost of a payday loan varies from lender to lender and state to state. Many states that permit payday loans usually have a $10-$30 interested per every $100 borrowed. The cost a payday loan from state to state is typically $15 against every $100 borrowed. This is according to the Consumer Financial Protection Bureau.
According to that calculation, against a loan of $350, total cost you would have to pay would be $52.50. If you pay the loan on time, your total return cost would become $402.50.
Online payday loans fluctuate. Many lenders often charge higher by claiming exemption from the rate caps decided by the state. Your rate of interest, if from a private lender, can vary from $20-$23. Majority of the loans however, are extended. 19 states authorized for payday loans permit lenders to roll over a mortgage which enables the borrower to pay the interest fee and increase the time of repayment to two weeks.
Again, it varies from state to state. Many consumer loans clearly state their annual percent which covers the interest amount and cost of fee.
If there is not enough credit in the borrower's account when the lender deposits the loan money, the borrower would be charged another bounced check fee ($20-$40) by his bank or the lending company.
Is it safe?
Payday loans are also illegal in some states as many of the times a borrower is unable to repay the loan. In such cases, if you apply online for the loan are then unable to repay, while the lender electronically withdraws the amount from your bank, you cannot opt from a legal advisor. The state would not be able to control your rate of interest as your loan as it is would be declared illegal. It is therefore advised to consider well before applying for a pay day loan.