A short-term loan or a cash advance that is available to a customer who has an employment record is called a payday loan or payday advance. As far as the lender is concerned, there is an element of risk attached to these types of loans since the amount is not secured. Hence these loans may be more expensive with regard to the interest to be paid back. However it is an alternative way to borrow money for a personal requirement at short notice.
How it works
Payday loans can be loaned online or from a bank. It is not essentially linked to payday as the name suggests, but in most cases allows the consumer to determine the repayment period. The procedure to apply for one online is pretty simple and straightforward. You are required to submit an application for the required loan amount, and it is approved very quickly, in as little as a day, and the loan money is directly deposited into your bank account. Similarly, on the due day, the repayment amount, which also includes the interest on the original loan, is taken directly from the borrower’s bank account.
In the traditional model, the consumer borrows money in person from a payday lender and in return provides a post-dated check for the loan amount and interest. On the due date, the borrower is expected to return the money borrowed to the lender. If the borrower fails to do this, the lender can make use of the check to redeem his funds. If the borrower’s account has insufficient funds to meet the check, he may incur charges for a bounced check as well as additional fees as a result of failure to pay.
Since, these types of loans are unsecured; the interest charged is much higher than a normal loan. It can be in the range of approximately 30% or more of the loan amount. This is because the risk of being unpaid is much higher for the lender in an unsecured loan than when it is a secured loan or if it is actually tied to the income of the individual.
How to get the maximum loan amount
The amount of money you can borrow on this loan depends on your income. People who have a higher verifiable income may be able to borrow more money. These loans do not normally require credit checks as lenders can check whether you have any short-term liabilities on the national database. Visit http://www.fullpocket.co.uk for more information.
You can further increase the loan amount that you may borrow if you have a credit card or line of credit. In this case, the amount is based on the available credit limit, rather than on your monthly income. Whether this would be a better deal than basing the loan amount on your monthly income, would depend on your credit contract and policies. In certain cases, credit cards charge higher interests on advances than when used for regular purchases. Some payday lenders offer lower interest to repeat customers, as they have a history of repayment and so are of lower risk to the lender. So, you can get a better amount if you take the loan from the same lender more than just once.