Early payday loan is a loan that helps you when you need money immediately to meet some urgent expense while your payday is still weeks away. The duration of this type of loan is very short, usually between two and four weeks, with the amount ranging from $100 to as much as $1500. This maximum limit varies with every lender. Your monthly income is also a factor that influences the maximum amount that you can borrow.
Understanding the Loan
An early payday loan is also referred to as a cash advance until payday. It is a bargain in which you promise to pay the loan amount when you receive your next paycheck. Here is an example of how payday loans work. You need 100 dollars to pay for the medical bill and your pocket is empty. Moreover, your pay date is still two weeks away. In this situation, lender of early payday loan will come out to help you by offering the required amount of money.
At the time of borrowing, you have to give a postdated check to the lender for the loan amount and interest. This check is cashable on the day you receive your salary. When you get your pay after two weeks, the borrowed amount and the additional charges are deducted from your account. In the case of online payday loan, when you apply through the Internet, you simply authorize the lender to deduct the repayment amount automatically when the loan is due from your bank account.
Many lenders allow you to use the rollover option also if you are not capable of repaying the loan amount on due date. Use of roll over option gives you the liberty of making repayment on the next pay date. However, you have to pay additional charges for exercising this option.
Cost of Payday Loan
Many factors affect the real cost of an early payday loan. Fee scale of different lenders varies greatly. It is wise to perform a thorough search before selecting the company. The amount you need to borrow is also an important factor affecting the real cost of payday loan. Another influencing factor is whether you have borrowed any loan from the same lender in past.
In any case, the cost of early payday loan is always higher than other traditional loan. This is because lenders consider it as a short-term and high-risk loan. That is why you should borrow only when it becomes absolutely necessary so that you have to pay finance charges for minimum time. Borrowing the minimum possible amount can also cut down the cost of loan considerably.
