How does Payday Loan Work?

   Payday loan is used for emergency cash needs. The cash is loaned usually till the next payday. Payday loan companies have been around for quite a few decades. In recent years, with the internet becoming more and more popular, online payday loan has become the instrument of choice for quick cash.

   Most of the payday loan online companies work in a similar manner. They require you to become a member of the website. This usually requires choosing a login name and password. You may also have to respond to an email to confirm your membership. Once you are a member, you can apply for a payday loan.

   Applying for a payday loan involves completing and submitting an online form. You may then
need to print out an agreement and fax it to the payday loan company along with some documents. The usual documents needed are a check (some companies need only a voided check), a bank statement and pay stubs. Some payday loan websites also require you to fax a photo identification along with the agreement. There are a few no faxing payday loan companies which do not need any documents to be faxed.

   Once the payday loan company receives your documents in fax, they review it and either
approves or denies the application. Payday loan companies usually do not do a credit check.
This is one reason payday loan is popular among people with bad credit history. Some companies do verify your check writing and loan history and approve your application only if you do not have a bounced check for the past few months.

   The approval or denial of the payday loan application is usually quite fast. Depending on the company this can vary between 30 seconds to one business day. Most of the application for payday loans are approved. The approval rates for most of the online payday loan companies are in the high nineties percentage.

   Once your application for payday loan is approved, most of the companies will directly deposit the amount to your bank account. This requires you to have a current checking account. Most payday loan providers deposit the cash the next business day.

   On the next payday, the payday loan company usually debits the loan amount and the finance charge from your account. If you are not able to pay back the loan amount on the next payday, most of the companies have provisions for extension. Extending a payday loan also means that you will incur more finance charges. Some of the payday loan providers give you option of either paying back the full payday loan or paying it back in installments.

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