When you need money for some personal purpose, for example you want to purchase a home or to meet some other kind of expense; you can approach a bank for a personal loan and this is a loan for personal use. But what if the amount you require is very small and the need is urgent? What if you want just $100 to repair your car which has broken down? You cannot then apply for a bank loan. The amount is too small and moreover approval would take time. There is a solution- you can apply for personal payday loans.
Normally, when we apply for a loan with a bank or a moneylender, the lender would want some kind of security against which he would grant the loan. This is to ensure that in case we default on the loan, he does not suffer a loss. A personal loan generally does not require any kind of security.
A loan which is repaid on payday is called a payday loan. Since payday loans are personal loans, they are also called personal payday loans. A personal payday loan also does not require security and the very fact that you receive a salary is security enough for the lender.
There was a time when borrowers of personal payday loans would personally visit the lender at his shop to request for a loan. The documents demanded by the lender would be submitted to him. Then borrowers started requesting for loans by telephone and the necessary documents used to be faxed to the lender.
Now of course, applying for personal payday loans can be done online. There are web sites which are linked to payday lenders. You have got to select one of these sites, fill in the form provided and you will immediately know whether the loan is approved or not. If your request has been granted, within a couple of days, the loan money will be deposited in your checking account.
Personal payday loans are generally borrowed by salaried people from low income groups. They may find it difficult to repay these loans on payday and the risk of default is very high. The lender would like to safeguard his interest. Since these are unsecured loans, payday loan lenders used to take a post-dated check from the borrowers for the loan amount and interest. Now, the borrower submits his checking account details to the lender when borrowing the loan. The salary is credited to the same account on payday and the lender immediately draws the money directly from it.
Often, personal payday loans are borrowed injudiciously, as the borrowing process is simple and there is no credit check. There is no documentation required either. The borrower does not realize that the interest rates are very high and that he may find it difficult to repay the loan on payday.
These loans should be resorted to only in an emergency and then too, the borrower should first ensure that he has the capacity to repay the loan.