You may have heard of a payday loan before, but have you ever asked yourself: “What is a payday loan?” Are you unsure how this differs from a traditional loan, such as the type you would take out to buy a new car, or how it relates to short-term loans, such as those that are given out by credit card companies every time that you make a purchase? If some of these questions have stopped you from applying, you need to take some time to read through the following to learn how this type of loan works and how it can help you.
In essence, a payday loan is just an advance on the money that you are already earning at work. It is not extra money. It is not meant to supplement your paycheck. It is designed to give you the money that you already have coming to you, but it will give it to you in advance. You can get the cash that you are earning as you earn it. This allows you to spend the money when you need to do so, helping you to avoid debt and other financial issues.
For example, perhaps you are only paid by your employer at the end of the month. On the sixth day of any given month, imagine that you are in a car accident. Your insurance covers most of the cost, but you still need to pay around $500 for your deductible. You do not have this in the bank, and you will not get your paycheck for three weeks. How are you supposed to pay? If you elect not to pay, how are you supposed to go to work, to earn the money, without a car? As you can see, this could present a very serious problem for you and your family.
When you apply for the payday loan, you will only have to show the lender that you are, in fact, employed. You will have to prove that you will make a certain amount by the end of the month. You can then ask for a loan that is less than or equal to that amount. If you make $3000 dollars a month, for instance, you will make enough to ask for the $500 loan. You will then be given the money, which you can use to pay to fix your car. This gives you your freedom of mobility, and it also allows you to earn the money at your job.
At the end of the month, you have to take the paycheck that you get, cash it, and use the money to pay back the loan. Most of the time, you need to pay it in full, but there are some exceptions. This is why it is important that you do not think of this as extra money. It is actually the money that you earned, that you have not yet been given. When it is given to you, you must return what you borrowed.