Wikipedia’s explanation of a cash till payday loan is ‘a small short term loan, secured against a customer’s next pay check.’ They are also known as pay check advance or cash advances. The premise behind this is exactly what it says, borrowing an amount of cash until your next payday when you repay the borrowed amount of cash! Easy right? Well no, there is a little more to it than that. It is wise to read up on what to expect before making the decision to go to a direct payday lender.
To apply and be successful for a cash till payday loan, you must be on a company’s payroll and be able to provide employment records. The direct payday lender needs to be assured that you have the capacity to be able to make the repayment.
The process of obtaining a loan can be two fold. The transaction can either be done via the internet or via a retail store. If you decide to proceed via a website, you will have to complete some personal details on the webpage and submit your application. Someone from the lender will call you to discuss your application and highlight the terms and conditions. You will provide your bank details so that the deposit can be made into your bank account to the amount that you have agreed. You will then be debited that amount plus interest on your payday date which will be agreed and within the agreed term set out by your lender.
If you decide you want to visit a payday lending store, you will liaise with someone face to face who will outline the terms and conditions and advise you of the fees involved. The borrower will write a pre-dated check which the lender will cash on the payday date. If this cheque bounces, the borrower will continue to incur additional fees until they make the repayment.
The interest rate or ‘APR’ that is charged is much higher than you would normally expect from a bank or any other type of loan i.e. a car loan. This is because the concept is that the borrower will be borrowing for a much shorter timescale i.e. one month. If agreed payments are not made, the borrowers will rapidly incur increasing amounts of debts.
Payday loans can be very useful sources of income if used in the right capacity. For example if you incur an unexpected bill, a short term loan would cover that. If your car breaks down and you need to get it fixed in order to keep going to work then again this solution is appropriate. It should not be used for things like holidays, shopping or other ‘luxury’ goods.
Cash till payday loans is a pretty simple concept. Approaching a direct payday lender is a good move if you completely understand the advantages and disadvantages of the transaction. Providing you stick to the terms and conditions agreed and use the facility sensibly, it can be a great short term cash flow solution.