How do Payday Loans Work

Do you need a payday advance today?  You can get it, but be prepared to pay for it.  How does it work?  Read on….

Places like the MoneyTree for instance, give payday loans based upon one factor, how much do you get paid per week or per month.  In other words, if you have a job, whatever your monthly income is, they have a formula that enables you to receive a loan based upon your monthly amount.  For example: If you receive $1000 per month, they will give you around $100.  It is roughly ten percent.  They do this in order to protect themselves in case of a default.

Can you get the money today?  Yes, but you must provide a few items for them to give you the cash.  First and foremost, you must give them a pay stub, or a bank statement.  Anything that definitively proves that you receive income, whether it be weekly, bi-weekly, or monthly.  What else do they require?  They want your phone number, and that can be a cell phone, or a land line.  This is pretty standard stuff, and it’s not that difficult to provide.  The good thing is that they don’t give a hoot about your credit standing.  The loan they give you actually has nothing to do with your credit worthiness at all, as they aren’t providing you with credit, they are loaning you money based upon your income and nothing else.

So how does the loan really work?  Assume you walk in today, get your loan in cash for whatever the amount they decide to lend you based upon your income, then you have usually thirty days to pay.  They will ask you when you receive your paycheck, and they will determine a particular day that you can repay the loan.  There is some leeway involved here, so make sure you and the money agent negotiate the best day for you to repay the loan.

How much money do they charge for the loan?  Again, the amount varies, but for the $100 loan, figure around $25 for their take.  So, at the end of the month, or whatever your loan repay date is, you would pay them back $125.  Of course, this is an estimate, but it is a good rule of thumb.  Do you have to repay the entire amount?  You can pay some of it, but be prepared to pay them a lot more in interest charges if you don’t pay off your loan every month.

It is very important to realize these companies should be used for emergency purposes only, as the amount of interest you must pay them can become prohibitive if you use them all the time.  Enough said.