Ever thought you could get a short term loan? If yes, then today, we shall be guiding you through the payday loan method. And alternatives that are out there.
What is a Payday Loan?
A payday loan is a short term loan given to an individual by the financial institution. The credit is provided for a very small tenure. Under this, the financial institution will grant you a higher amount on a short-term basis. The interest rate charged by the financial institution for providing a payday loan is usually very high. The credit is given to you until you receive your next salary or wages. The interest rate depends on the amount of loan you acquire and your income.
The institution sets the interest rate depending on where you reside, your monthly income, and the loan amount granted. Different regions have different laws pertaining to a payday loan. Some areas prohibit institutions from granting this loan. Once your request is approved, you will receive the amount immediately. The amount will be given to you either encash or be deposited in the account. The tenure of the loan is a maximum of 1 month. The loan seeker is required to pay the mortgage and within a tenure of 15 to 1 month.
How to Pay Back the Loan
The loan is supposed to be paid back on a stipulated time. The financial institution will give you a due date before which the amount must be paid back. The amount can be returned either through cash or by direct deposit. The amount returned must include the interest rate amount along with it. The institution will refuse to receive the payment if the interest rate is not included in the loan amount. If the loan amount is not returned before the due date, the institution has full rights to take the amount from your account.
Another action the financial institution will take for nonpayment of the loan amount is your property’s confiscation. Before granting the loan to secure the amount, the institution will ask you for your personal property papers. The individual on failing to make the payment will either lose out on the documents or amount from his account.
Alternative to Payday Loans
People go with other alternatives because of the high-interest rate charged by financial institutions for granting a payday loan. The other options are mentioned below.
- An advance payment from work
- Your savings
- Help from a friend
- Help from a spouse
Begin your emergency fund
Things happen and you want to make sure you can protect yourself and not cause more harm down the line. And the first step is to start building an emergency fund. For any issue that comes up you’ll be ready.
What's in this infographic
In the infographic below, we lay out the 7 items that you can do, instead of getting a payday loan. We kept it simple and easy for you to understand each point.