Payday loans - your emergency cash lifeline

Payday loans - your emergency cash lifeline

Finance Channel / Bullz-Eye Home

You've been asking the lovely lady next door out for a long time and unexpectedly, she now says yes. You would like to take her out to dinner at the best place in town, but, unfortunately, you are a little low on cash and payday is still some days away. Or, let us say you are faced with some emergency medical expenses, which cannot wait until payday. You find it awkward to borrow from friends or relatives so ideally, you would like to borrow the money on a commercial basis without delay or fuss and repay on payday.

Your solution is known as the payday advance or the payday loan. The payday loan is a short term temporary loan to cover emergency expenses that cannot wait till payday. The lender will generally take a postdated check from the borrower and, in case, the loan is not repaid on the due date, the lender will cash the check. If the check bounces, the borrower is faced with the bounced cherub charges as well as possible additional charges and penalties for not repaying the payday advance as scheduled.

Payday loans are relatively uncomplicated and very quickly processed. You simply need to go online and fill out an online application form and fax the necessary documentation to the lender. Obviously, you will need to demonstrate a regular source of income and stable employment. Typically, the loans are processed within 24 hours and the funds are directly deposited in your checking account. On the due date, make sure that you have enough funds in your checking account to repay the loan.

These loans have become highly controversial because of the costs involved. The finance charges can vary from 15 percent to 30 percent of the loan value for two weeks, which works out to an APR of 390 percent to 780 percent. If you live in a state where the state imposes legal limits on usury, they could be cheaper.

You should find out upfront what the loan is going to cost you and then decide whether it is worth the expense. If a lender is not forthcoming about the true costs, walk away from him and find yourself another lender.

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