Short term loans can be incredibly useful. Also known as payday loans, a short term loan can help cover bills, car repairs, medical bills and other unexpected expenses until payday. Of course, when one engages in payday loans, he or she is obligated to pay back said bills, but typically payday loans are only a few hundred dollars, and the time frame to pay back the loan is typically anywhere from a few weeks to a month.
The basic loan process involves a lender providing a short term unsecured loan, to be repaid at the borrower’s next payday. There are even online payday loans, which allow people to get quick loans without having to go meet face to face with anyone.
Interestingly, a small percentage of payday lenders have in the past threatened delinquent borrowers with criminal prosecution for check fraud. This is highly illegal in many jurisdictions, and has been denounced by the CFSA, the trade association of loans. On that note, bouncing checks that people write to payday loan lenders can end up on a ChexSystems file, which is an important credit document that helps people get bank accounts, future loans, and even mortgages.
When someone takes a payday loan, there is typically no interest involved because the loan will be paid back very quickly. However, not paying back a loan can cause serious financial issues, even though the lender cannot legally attempt to take legal action against the loanee. As such, many loaners are selective about who they loan to. Often, people must show proof of employment, such as a paycheck stub, in order to receive a payday loan.
Ultimately, sometimes people need a little bit of money to hold them over for a couple of days until payday. Given the tough economy and the high prices of so many important commodities like rent, electricity, food and car bills, payday loans greatly benefit a large portion of Americans who struggle to make ends meet.