A guide to payday loans
Every time you turn on the television set or go online, you hear or read about payday loans, but do you really know what they are or how they work? Perhaps you think that payday loans are relatively new, but the payday cash advance industry has quite a fascinating history.
Short-term and payday loans have become more popular recently and advertising for payday loans is everywhere. So just what is a payday loan? It is a very short-term loan, designed to see the borrower through until his or her next payday. This is usually a period of around two weeks.
Payday loans first emerged in the 1930’s. They are usually offered without a credit check or collateral being required, all the lender looks for is that you have a regular salary coming in.
One of the first forms of payday loans took a different form. Instead of offering cash, many employers would set up accounts with local stores allowing their employees to buy goods on credit, the cost of these goods then being automatically deducted from their next paycheque.
From there, independent payday lenders set up shop and offered to give cash advances as well as cash cheques. The borrower would write a post dated cheque to the lender for the amount borrowed plus a lender’s fee, which the lender would then cash upon the borrower’s next payday.
The process is much the same today, with the lender still looking at the borrower’s employment status and salary level rather than their past credit history and any outstanding debts.
The regulation of payday loans differs greatly from country to country and from state to state within the US. In some states there will be restrictions in place as to how much interest a lender can charge, as the interest charged on these loans can be higher than with standard loans.
If you are looking to secure extra funds, then there are cheaper options besides payday loans. Borrowing on your credit card may be cheaper, so check the cost of charges and interest rates to see what gives you the better deal. A personal loan from an established bank like Santander can also be a lot cheaper, with their cheapest rate personal loans being available online. However, with a personal bank loan you will need to provide some collateral and they will check your credit history too.
Related posts:
- Understanding Repayment Terms for Payday Loans
- Understanding your Legal Rights Regarding Payday Loans
- Short Term Loans Pros and Cons
- What Do I Do if I Cannot Repay My Payday Loans?
- Four Tips to Find Short Term Loans
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