How Do Payday Loans Work And How They Can Help Get You Quick Cash

If there is ever a type of loan that gets bad press it's the payday loan, also know as a cash advance. People read the headline APR and are shocked, declaring it a rip off or scam. This is a big mistake though, and entirely comes from a misunderstanding over how payday loans work.

To understand the value (and importance) of the cash advance loan you need to know how payday loans work. Thousands of people swear to the importance of payday loans, and more and more are using them everyday. Surely not all of them are wrong.

How do Payday Loans Work?

As the name suggests the online cash advance loan is a loan that is meant to tie you over until payday. These loans are designed for people who can't use a traditional bank for a loan due to credit issues. It is a type of loan that is designed to be short term, simply giving a quick injection of cash when it is needed, then being paid off at the earliest opportunity. These loans are perfect for people who have unexpected emergencies or those who need extra cash to last until payday.

This is in complete contrast to 'conventional' loans, which are designed to be used when large sums of money are needed, and paid back over time. As you can see the two loans are very different in their targets. This means that they are set up differently and have different credit requirements.

From application, the idea of the payday advance is simple. You apply for an amount and a length of time (usually until your next payday). The amount you can borrow is usually limited, as is the length of time you can choose to pay it back over. Most lenders will offer up to $1500 for first time users.

If accepted (usually decided online) you get the payment into your account within hours, meaning you have the money available to spend. If approved during non-banking hours, your loan get's deposited the following business day.

You're then expected to pay back the money on the date selected at the first application. You will also pay back how much you were told it would cost at the time of application.

Unlike the APR figures of a traditional loan, a payday loan tells you what you need to pay up front. This may be a high amount when based on APR, but if compared to the length of time a normal loan goes on for the last figure is often a far more affordable amount.

Guarantor Loans for Bad Credit

When one applies for a loan and is able to successfully repay it with no major problems, this is a good thing. Such a scenario boosts the credit record of the borrower. In his future applications for similar loans, he will be regarded as a trusted borrower, considering his good credit history. The more he proves his worth as a good borrower, the better his credit history gets. Thus, the easier his loan applications are approved in the future.

How about those with bad credit history? A person's bad credit history is a result of improperly repaying a loan, a failure to fulfill the terms of the loan by the borrower. In such cases, it is difficult to apply for a loan with this kind of reputation. And chances are, again and again, one will be refused a loan if this is the case. But problems always have solutions. For one with bad credit record to be able to borrow money from a financial institution, he needs a guarantor.

Those with bad credit getting a loan of this type can help them improve their credit score if they make their repayments on time, and this will obviously make it easier in the future, for them to get mortgages, credit cards etc.

Guarantor loans allow people with a bad record history to enter into a loan. The guarantor helps in securing the obligations that come with the loan. Of course, the guarantor must have a good credit record. In case of the borrower's failure to settle his responsibility with the loan, he can shoulder for him. The guarantor may be a close friend or a family member.

Having a guarantor for a person with bad credit history puts the latter in a good place. With a guarantor in place, the borrower's credit background will not be critically considered. Furthermore, the borrower may actually loan a bigger amount.

The credibility of the borrower, despite his credit record, can be assured with a guarantor. Thus, his credit record will improve, making it easier for him to apply for loans in the future.

Thus, with the reasons above, there is no need to worry for those with a not-so-attractive credit record about not getting a good loan. One reliable person is just what you need to have your plans secured. Bad record or not, you are entitled to the same rights to a loan.