As a type of short-term lending, payday loans are quick, simple, and convenient. Today, everything is done remotely – applications are submitted online, approval is received in a matter of hours, and funds land in the customer’s bank account with no hassle. However, despite the technological accessibility, it is essential to remember that payday lending still obliges a borrower to carefully follow all the clauses of their agreement with the lender. So, how does repayment work?
By definition, such loans imply repayment on your next pay day – all you need is your account details, a steady source of income, and a recent bank statement. Typically, the term spans 2-4 weeks, and it is possible to extend it (rollover) to avoid nonpayment fees. Otherwise, like any other legal bank credit, this service may entail extra fees and prosecution should a borrower fail to repay the debt. Thus, being aware of the payment procedures, you avoid extra costs and legal consequences.
Whay You Need to Know about the Payday Loan
Reliable borrowers may be rewarded with lower interest and larger amounts the next time they borrow from the same provider. Your lender may always be asked for clarification of their policy details, and the agreement terms can and should be thoroughly explained. These include the due date (must be repaid once in full), the full amount you end up owing (the loaned sum plus interest and fees) and all the possible conditions entailing any extra charges.
If a borrower defaults on their payments (even due to forgetfulness), they will be charged a certain amount, and such fees are likely to accumulate until full repayment. To avoid this, they could extend your period through rollovers or Extended Payment Plans, depending on the lender and state laws. Some agreements will stipulate automatic renewals unless the borrower contacts the lender to set up the payment ending the loan.
The lender will provide the loaned amount by depositing it in your checking account electronically, wiring it, or even issuing a prepaid debit card. You might be asked either for a direct debit permission or a post-dated check. In any case, all withdrawal procedures and requirements must be clear, so that the due date brings no unpleasant surprises.
You must remember to ensure that there is enough money in your account by the agreed due day. Hence, it is important to spend the borrowed funds wisely, and budget sensibly in order to pay it back on time. You could also decide to postpone inessential purchases or open a savings account in case you need another short-term loan in the future.