Online payday loans are short term loans that can be used to help a person get through a financial rough spot. They are small loans for usually no more than a hundred bucks, and can be used when you are temporarily out of money and need to pay bills, buy food, or cover other necessary life expenses. They are called payday loans because they are generally only used to support you until your next payday. There are many risks associated with online payday loans, so here is some information to help you decide if they are right for you.
Online payday loans are generally easy to get as the fees and interest rates are incredibly high. When you take out a payday loan, the process involves a lender (that’s not a bank, usually a loan store) giving you a short-term unsecured loan which will need to be repaid by the borrower’s next payday. Some form of employment verification, such as check stubs and bank statements, are required to receive online payday loans.
When you get online payday loans, you generally write a check for the amount you are borrowing, plus a fee. You can leave the check with the lender, and they will cash it once your loan comes due. These are generally post-dated checks, and if the lender attempts to cash the check when your loan is due, but you lack sufficient funds, the check will bounce and you will be charged fees by your bank. However, if you find yourself unable to pay your online payday loans when they come due, you can generally roll it over, so the loan is extended to a future date.
Extending online payday loans may not be a wise decision, though. Cash loans such as these should generally only be used as a last resort, as they end up being very expensive for the borrower. Interest rates and fees can be extremely high on online payday loans. The annual percentage rate on payday loans can several hundred percent. Additionally, if you fail to make your payment when the loan is due, you will most likely incur additional fees from your bank due to a bounced check. For these reasons, several states have heavy regulations on payday loans. For example, the state of Illinois allows residents to only have payday loans for up to 45 consecutive days.
While payday loans can help somebody out when they are in a tough financial situation and have nowhere else to turn, they generally perpetuate a cycle that never ends up solving the initial problem. In the short-term, perhaps if you needed money to repair your car so you could continue going to work ever day, payday loans can be helpful, but as a long-term strategy they can put you in a vicious cycle of debt by charging extremely high interest rates.