What is a payday loan or a cash advance? How does it works

A cash advance or short-term loan is called the payday loan. The main point is that you have to pay a fee if you want to borrow the money; even this loan is for one week one month.

How does cash advance or payday loan work?

First, you have to give a personal check to the provider for money that you want and also a charge

The company keeps your check and provides you the amount in cash after the deduction of charges

The next step is that you have to pay the lender in cash on your next payday.

How much does payday loan costs?

The main thing is that payday loan costs a lot. If you are borrowing money for one week or one month you have to pay the charges. For example if you take a loan of £500 then the charge for £500 is £75. Now you have to give £575 check to the lender. After this, the lender gives you the amount of £500 and keeps your check. After the one month, you have to return £575 to the lender and take your check back. Now the conclusion is that to take £500 you have to charge £75. 

The Process Of Comparing the Cost:

Most loans come with the rate of the annual percentage and this is called APR. The annual percentage provides you the information about costs of the amount that you borrow money for one year and the annual percentage of payday loans is very high

After taking a cash advance or payday loan then direct lender will tell you about the APR and the complete charges of the loan

APR:

Annual percentage rate based on different things. All the things are given below

  • The amount you want to borrow
  • The charge of that amount or interest rate
  • The charge amount that you pay for the borrowed amount
  • The time period  for the loan

What to do prior to taking a cash advance or payday loan?

For the very first you should also have to think about the other method to make money for the loan.

  • Consider that you may take a loan from a credit union or bank?
  • Make money from your savings
  • You can also concern with your friends or family members for required
  • Get extra time for the bill payment from the credit counselor or creditors
  • Credit cards are also used for money.

How to decide which way is best to take a loan?

If you think that you have more than one options then you have to compare the cost of all options and then take decision of borrowing money. Including

  • The number of charges
  • What is the annual percentage
  • After how much time I should return the loan
  • What if I can’t return money back

What if I can’t return the loan to the lender?

In case if the consumer could not return the money to the lender then the consumer has a time period two extended weeks. It is also said to be “extending the term” or refinancing. But for this extended time, you have to pay charges.