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How a Payday Loan Works
Consumers looking for an emergency loan of $100 - $1500 without
the hassles of a credit check or mounds of paperwork, turn to payday lenders who are willing to
take the risk on a short term loan. Typically these loans are for a
short period of time.
Payday lenders agree to deposit the $100 - $1500 loan into
the borrowers checking or savings account, usually the same or
next day. The borrowers agree to let the lender debit their
account on specific future dates (almost always the date the
borrower receives their income) for a specific minimum amount
(usually just the fee). Borrowers get the emergency funds when
they need them without hassles, and lenders receive their fee
giving the short
term loan.
Borrowers should pay these loans off as quick as possible. If
stretched out over a long period of time, the fees can really add
up.
A Borrower applies for a payday loan by providing very basic
information to the lender. Typically the list looks like this:
The borrowers; name, address, phone numbers, and email
address.
Some yes/no questions like; do you receive at least $800 per
month
income? Do you have a checking or savings account?
Information to confirm the borrowers identity (to comply with
the USA PATRIOT ACT) such as date of birth and social security
number.
Lastly, the lender will need the banks routing number and the
account number that the money should be deposited into. This is
also the account the lender will use to debit the money from
later.
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