The banking institutions provide different forms of credit and the payday loan is one of them. Payday loans are considered to be the short term cash loans that are held for future deposit on the personal check of the borrower. This kind of loan is also directly transferred to the borrower’s bank account directly. If you wish to borrow a payday loan then you need to write a personal cheque for the exact amount that you require and you will receive the borrowed amount in cash. There are also cases where the borrower can directly sign over some electronic software so that the amount gets deposited right into their accounts and they can repay the payday loans right from their accounts.
The lender generally holds the cheques until and unless the borrower pays off the borrowed amount along with the extra financial charges applied to the loan amount. You can consider redeeming the cheque by either paying off the loan amount in cash or by paying only the financial charges for the purpose of rolling the loan over for an extended time period.
There are some lenders who provide the borrower’s with certain long term pay loan and also request for an authorization to access the borrower’s bank account and withdraw multiple numbers of payments.
The average payday loan term is about two weeks and the loans sanctioned cost almost 400% annual interest. States that do not cap the maximum cost tend to charge higher rates of interest.
If you want to know whether you are eligible enough to get a payday loan in India then all you need to do is to go through the following pointers:
- Open a bank account and deposit a large amount of money into that account.
- You must have a steady flow of income and also an authorized identification.
The payday loans are mainly based upon the ability of the lenders to collect the money and not on the borrower’s ability to repay the loan. Hence, a lender will not ask too many questions or conduct a full credit check to determine the financial ability of the borrower. This is a big reason why the payday loans tend to create a debt trap.
These are some of the significant facts that you ought to know before applying for a payday loan. Payday loans are the perfect way to bridge a short term cash crunch and a large number of consumers are opting for this kind of loan.