In the contemporary world, money is everything. There is nothing one can get with money and on the other hand, everything one has can be measured monetarily. Even a good night’s sleep is not available without money because the house where one will sleep, the bed and the air-conditioned everything cost money. Therefore, money becomes the foremost important factor in today’s lifestyle. To earn money most of the people have to work and get a job with monthly wages. Life becomes a circle of one month at a time. A month ends, the payday comes and one gets money for a month to survive and cater to his or her needs accordingly. Time goes on, that single person may marry and raise a family, and the responsibilities grow with the time and event.

Life is unpredictable and with that comes the emergencies. The need for money becomes more. Not everyone can change a job and earn a higher salary matching their needs. Therefore, the question of borrowing appears. One can borrow from several sources but now the mass trend is going on towards Payday Loans. A payday loan is a short term unsecured loan of a relatively less amount based on the salary of the individual which has to be repaid on the next payday.in this type of loan the interest rate is very high and the processing charge is also on the higher side. The typical charge of a payday loan is $15 to $30 per $100. The amount of the loan varies from $300 to $1000 at the most.

How does one get the payday loan?

A payday loan is an unsecured loan. It is given to a person with a salary proof, personal ID and a bank account. Here only salary proof and employment history are taken into account. The lender gives the loan after checking the documents within 24 hours. It can be a cheque, cash or can be electronically transferred to the account directly. Sometimes a preloaded debit card also is given. The loan has to be paid off by two weeks or the next payday whichever is earlier. In the process, the borrower has to give a cheque of the repay amount or permission to withdraw from his or her bank account electronically on the payday. If there is insufficient balance in the account then the cheque bounces and the borrower has to face a charge from the bank and the lender both. If one wants, they can postpone the paying time at the cost of extra charges from the lender. Though payday loans are supposed to be lump-sum payment at one, go, in a lot of cases, this may not happen. In this case, the borrower only pays the fees or charge of the loan take and the loan is renewed as a new loan. In a payday loan unlike other loans, credit history or no credit history is not taken into account at the time of approving the loan. Therefore, a person with bad credit history is also eligible for a payday loan. The ability to pay the loan is not also considered at the time of agreeing upon the loan amount.

How much cost is involved with a payday loan

Cost of a payday loan varies from $10 to $30 per $100 taken from the lender. A two-week payday loan costs around 400% of annual percentage rate (APR) against the credit card which costs around 12-35% annually. Every time a payback is deferred there are extra charges added to the loans, in this scenario within a few months the borrower ends up paying more in the interest than the original loan. In many places, the government intervenes in this loan procedure and has capped the amount of loan and APR to a certain limit. In some areas due to the government’s rules and regulation, payday loans are not available.

Where one can get a payday loan

There are broadly two types of payday loan shops available. One is where one can walk into a loan shop and get the loan processed and approved from the same. After agreeing on the payment terms, the customer is given a specific time, which is the next payday to come in person to repay the amount, or a cheque is given for the same.

Now there are other avenues like online payday loans. Where the documents and proofs are given over the internet or fax and depending on the same the loan is given. It is electronically transferred to one’s bank account and for the repayment authorization to withdraw from the same bank count is given to the lender.

The category of people taking payday loans most

According to the survey, the demographic of the payday loan takers varies from white females in the age group of 25-44 years, recent immigrants, divorced, singles, African Americans and single parents. They take loans not for emergencies,  but to just meet recurring monthly expenses, which results in being in debt for an average of five months of the year.

Facts regarding the effect of payday loan on society

Payday loans are high-interest loans, which mainly caters to the low-income group and less educated ones. These people are also not getting loans from a traditional bank, as there are not being able to match the criteria of the banks. They have no option but to take the payday loans and slowly walk towards bankruptcy. The collection policy of these loan shops is not also according to the rules of the government. They practice a hard collection policy, which includes calling before and after the stipulated time, calling the references and sending people to collect money from the borrower. The government tries to intervene and stop the above bit nothing much could be done due to the loan policy agreement. The rising cost of life forces the people who take payday loans uses the money for their day-to-day operation cost of life and often cross their bank overdraft limits for not being able to save money on time. Therefore, to avoid getting into this vicious circle of debt one must learn to save for the future.