What Is A Payday Loan?
You may have noticed the abundance of payday loan store fronts across the country
. Payday loan companies are part of a $2 billion a year business. What is a payday loan? A Payday loan is a cash loan made against the borrowers next paycheque. A payday loan is also sometimes referred to as a payday advance. You usually have to pay back the loan on or before your next payday.People with poor credit histories tend to turn to payday loans, but they should consider these facts. A payday loan is one of the most expensive ways to borrow money and they do not improve your credit score.
Payday loan companies can charge up to $21 on every $100 borrowed over generally a two week period. The cost will vary from store to store. Some of the charges may include:
Interest
Processing fees
Administration fees
Late Payment fees
Set up fees
Collection fees
Convenience charges...etc.
While it may be fairly easy to qualify for a payday loan, you are required to prove income, a permanent address and an active bank account. The lenders will also ask you to provide either a post dated cheque or get authorization for direct withdrawal from your bank account.
Payday loan companies will tarnish your credit score by reporting you to a collection agency should you default on payment. If you make good on your payment, payday loan companies fail to report your payment to the credit bureau. Making payments on time help your credit score but because Payday loan companies are not members of the main credit reporting agencies, paying off your payday loan on time will NOT help improve or rebuild your credit score.
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