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The Payday Loan Process - What Exactly Does It Involve?

It is important to understand exactly what payday loans are and how the payday loan process works before you decide to go in for one from the various types of payday loans available. A payday loan or a cash advance loan usually is a small amount for a short period of time - it ranges from $50 to $ 1000 depending on the payday loan company you choose. There is no restriction on who can apply for a payday loan. In fact, the payday loan companies don't even do a credit check.

The basic difference between a bank loan or credit cards and a payday loan is that you, as the borrower, undertake to repay the loan from your paycheck, usually by the next payday.

The Payday Loan Process

Here is how process of fast payday loan works - you complete an application and provide your latest paycheck stub, bank statement and identification. A loan agreement is involved, which you sign and give to the lender along with a postdated check for the loan amount. The payday loan company holds on to your check until the due date of your loan, which could be for two weeks to a month. On the due date, the lender deposits your check in repayment of your loan. Remember, the agreement you enter into is a legal document and you must be aware of what you are getting into.

There are many pros and cons of payday loans. Avoid going in for more than one payday loan at a time.

So How Will The Payday Loan Company Decide To Give You The Payday Loan?

Most payday loan companies expect proof that you have a current job. They usually ask for the following documents, which you fax them before they agree to sanction your cash advance loan:

• You latest pay stub to prove that you are presently employed
• Your latest bank statement to get an idea of your deposits and withdrawals. This will also tell the payday loan company if you have borrowed from other payday loan companies. This will indicate whether you are capable of repaying the loan you plan to borrow along with the fees.
• Copy of a cancelled personal check, which will give your payday loan company your bank details to make the loan transfer to your checking account. This is also useful to withdraw the fee due from you.

You must know what to watch out for in payday loans - especially the fax less payday loans where you don't need to send even a fax. This looks very simple, but apparently many payday loan companies ask you to give them the log in information to your bank account under the pretext of verifying the account details online. Now this can be very risky, as you will be giving full access to your bank account. Do not do this. Stick to sending a fax with your information instead.

Payday loans are fine for short term cash advances when you urgently need cash, but bear in mind that you must repay your loan in full when it is due, otherwise you will be stuck with mounting fees and exorbitant interest rates. Read the FAQ about payday loans for more information.