Payday FAQs – Ten Common Things You Want to Know About Payday Loans

In this article you will get information about common questions being raised by payday loan borrowers to lenders. The common questions such as “What is a payday loan?”, “What are short term loans?”, “What is interest rate?”, “How soon to pay?”, “Does it require payroll information?”, “Do lenders check you credit history?”, and same day bank transfer possible etc. Borrowers are also asking questions such as “Is it risky loan, spiraling into high interest loan?” etc.

1. What is a Payday Loan

This loan is an unsecured loan given to borrower till he or she receives next paycheck. In other words loan is given against the guaranty of next paycheck. Typically the need of this loan comes as emergency need on part of borrower such as car repair, medical emergency or unexpected bills etc. These loans existed earlier also and were called as private loans. These loans came with higher interest rate. The reason for higher interest rate was readily available and with less documentation. Same loan features are provided under payday loan term. The difference is loan is given against next paycheck. The length of loan is 2-3 weeks.

2. How to Qualify for paycheck Loan

Well qualifying process for paycheck loan is easy and does not require long procedural documentation process as in the case of traditional loan with banks. The basic requirements of loan are very few:

1) Applicant must have a current job

2) Applicant should have age more then 18 years old.

3) Applicant should be United States Citizen

4) Applicant must have a saving or checking account with any American bank.

5) Applicant must earn at least $1000 per month to avail a small loan as $200

Please be aware some states in America have their own laws governing payday loans. In some state such loans are banned and also length of the loan period is fixed.

3. Length of Loan process

Since a payday loan is backed with technology the approval process is fast and typically money is wired to applicant’s account with 24 hours. Different states and lenders have their own terms an conditions, before applying check with staff for complete details. The online process is simple and can be completed in few steps. The important thing to remember is during this online application process you will be entering personal details, social security, driving license number, and payroll details. Be sure and confirm first with customer care and get all details you want to know.

4. Can person with bad credit apply for such loan?

Most of the lenders are able to work with people with bad credit. Since loan is given against payroll check from current job and that is the reason lenders omit background d check. However different lenders have different set of terms and conditions.

5. Length of Loan term

The typical length of loan term is 2-4 weeks max. Since loan is given against your monthly or bi-weekly payroll check the loan length is less then 4 weeks.

6. How secure is online application process?

Well lenders are dealing with applicant’s personal, payroll information so they have placed max security precautions on their website. If you read information on their website you will see Secure Socket Layer (SSL) encryption technology seal on their website. They have to ensure users are given secure way to input their personal details.

7. When to use this service?

This service shouldn’t be used as excuse to get some extra cash for party, vacation etc. Use a payday loan only in very emergency situations when you are not able to arrange funds from any other sources. short term loans should be availed only when you know you can pay back with in stipulated time. NEVER TAKE MULTIPLE PAYDAY LOANS.

8. Why are so much negativity about these loans?

Since these loans come with higher interest rates and if not paid on time lenders will raise penalties and interest more. Some people use multiple loans and end up paying multiple higher interest on loan and eventually fall behind the payments and come under debt. Also some lenders charge higher penalties once borrower misses due payment. All these things have made paycheck loans less popular.

9. How much documentation is required?

Since this is online application process most of the information is your personal details and payroll information. Some lenders may require extra information if the required given information through online application is not enough to award a payday loan.

10. Read, Review and Confirm

Loan borrowers should read, review terms and conditions of loan lenders before applying for a loan. Get you clarifications confirmed from customer care staff.

Student Loan Debt With Prepayments

Today, two-thirds of college students leave school with at least some debt from college loans. The average debt is approaching $25,000, a figure that includes not just the original amounts borrowed but, for most students, accumulated interest as well.

For students who hold government-issued federal student loans, repayment on those loans won’t begin until six months after graduation, at which point most students will enter a standard 10-year loan repayment period.

Loans That Sit, Getting Bigger

While a student is enrolled in school at least half-time and during the six-month grace period after the student leaves school, even though payments on federal school loans aren’t required, interest on the loans continues to accrue.

If the loans are unsubsidized, the accrued interest will be added to the loan balance and capitalized, and the student will be responsible for paying that interest.

With subsidized federal college loans – which have smaller award amounts than unsubsidized loans and which are awarded only to those students who demonstrate financial need – the government will make the interest payments while the student is in school, in a grace period, or in another authorized period of deferment.

The bulk of most students’ college loan debt will consist of unsubsidized loans – loans that get larger as time goes by and you make your way through college, simply because of the buildup of interest.

Preventing Interest Bloat

As a college student, there are steps you can take, however, to counteract this ballooning of your school loans. There are several ways that you can manage your student loan debt and rein in the added burden of accrued interest charges, both while you’re in school and after graduation.

Seemingly small steps can help you significantly reduce the amount of college loan debt you’re carrying at graduation and could shorten the amount of time it will take you to repay those loans from a decade to seven years or less.

1) Make interest-only payments

Most student borrowers choose not to make any payments on their student loans while in school, which leads to the loans getting larger as interest charges accumulate and get tacked on to the original loan balance.

But you can easily prevent this “interest bloat” simply by making monthly interest-only payments, paying just enough to cover all the accrued interest charges each month.

The interest rate on unsubsidized federal undergraduate loans is low, fixed at just 6.8 percent. Even on a $10,000 loan, the interest that accumulates each month is just $56.67. By paying $57 a month while you’re in school, you’ll keep your loan balance from getting bigger than what you originally borrowed.

2) Make small, even tiny, payments on your principal

Beyond keeping your loan balances in check while you’re in school, you can actually reduce your debt load by paying a little bit more each month, so that you’re not just covering interest charges but also making payments toward your loan principal (the original loan balance).

Loan payments are typically applied first to any interest you owe and then to the principal. Payments that exceed the amount of accumulated interest will be used to reduce your principal balance. By paying down your principal balance while you’re still in school or in your grace period – even if it’s only by $10 or $15 a month -you’ll reduce the size of your college loan debt load by at least a few hundred dollars.

And by reducing your total debt amount, you’re also reducing the size of your monthly loan payment that’s going to be required once you leave school, as well as the amount of time it’s going to take you to repay the remaining loan balance.

3) Don’t ignore your private student loans

If you’re carrying any non-federal private student loans, use this prepayment strategy on those loans as well.

A few private education loan programs already require interest-only payments while you’re in school, but most private loans, like federal loans, allow you to defer making any payments until after graduation. As with federal loans, however, interest will continue to accrue.

Private student loans generally have less flexible repayment terms than federal loans and higher, variable interest rates, so your private loan balances may balloon much more quickly than your federal loans and can quickly spiral into the tens of thousands of dollars. Making interest-only or principal-and-interest payments will help you keep your private loan debt under control.

4) Look for non-loan sources of student aid

As you make your way through your second, third, and fourth years of college, if you find that your monthly student loan interest payments are creeping up beyond what you can comfortably pay, that may be a sign that you’re relying too much on college loans and your debt load is becoming more than you can manage.