In the United States, as well as in other countries around the world, banks and other types of financial institutions typically only offer long-term loans for specific minimum amounts of funding.
This can create a very real issue for people requiring only a small amount of money, perhaps as little as fifty dollars or as much as five hundred. The choice to use a payroll advance, also called a payday loan, to address minor cash shortages is an effective way to get through without having to go to the bank and take out a loan that is simply not needed.
When To Use
Emergencies of all kinds can cause a cash flow shortage between paychecks. In these situations, getting a payday loan and simply paying the fees is often much less costly than putting the cost of the emergency payment on a credit card. With the high interest rates and the uncertainty in repayment, these monthly charges on these cards can really add up.
With the choice of a payroll loan, there is no interest charged, just the fee that is quoted up from by the service. If paid in full by the terms of the loan, which is typically not more than 14 days or to the next payday, there are no additional costs or fees. This makes budgeting easy for the borrower.
Getting the Loan
A payday loan will not require any collateral or a credit check. Instead, the service will require proof of identification as well as proof of a bank checking account and employment.
The loans are provided immediately, with the entire process just taking minutes. Then, all the borrower has to do is return to repay the borrowed amount and fee on or before the due date to close the loan.
