Payday cash advance loans are a good resource for emergency cash management. These
short-term loans can prevent a short-term cash flow shortage from snowballing into a
long-term financial disaster. An application for this type of advance does not require a
credit check or a minimum credit score. The only requirements are a checking account
and a steady, verifiable source of income from employment. In many states an
application can be filed online at the website of the lender.
Due to government rules and regulations, payday loans seem to have an extremely high
interest rate, however this is a fallacy. Many people confuse the Annual Percentage Rate
(APR) for the simple interest rate. The simple interest rate is the per cent of the loan
principle that is charged for the loan. For example, if the loan is $100 and the interest rate
is 10%, the interest charged is $10. The annual percentage rate is a legal requirement
which is supposed to show the true costs of a loan. It was originally applied to credit
cards to show the effects of other charges such as annual fees, cash advance charges and
interest charged.
For cash advance loans the annual percentage rate is calculated by converting the simple
interest rate into an annual rate. IF the loan is $100.00, simple interest is 10%, the interest
will be $10. If the loan duration rate is 30 days, the interest rate will be multiplied by 12,
the number of 30 day periods there are in one year. Therefore, a 30 day advance with an
interest rate of 10% will have an APR of 10% times 12 or 120%.
Despite the confusion this APR generates, pay day loans can save borrowers money. If
someone takes out a pay day loan to cover car repairs on a vehicle needed for work, the
interest paid is insignificant compared to the hardship of a loss of employment. The same
goes for emergency medical expenses, household repair bills and many other unforeseen
expenses.
The reason payday cash advances can be processed so quickly is their simplicity and
short duration. All any borrower has to do is provide proof of employment and a
checking account. The money will be paid back with the next paycheck, usually by an
electronic draft on the checking account. Even though repayment is required with the
very next paycheck deposit, many companies are willing and flexible enough to grant a
second cash advance payday loan for a lesser or equal amount of the first one.
|