Online loans are a very convenient way to get a short term loan, often referred to as “payday loans.” As is often the case, a borrower needs money before payday and accesses an online loans company for the money. You’ve seen the ads on TV. Getting cash loans is easy as long as you, the borrower, can verify your income through a pay stub or bank statement.
The online loans application process is simple, and borrowers decide how much money to access in these short term loans, often for the period between now and the next payday, generally 13 to 30 days. After you have repaid your online loans, and you need the service of payday loan lenders again, you can generally request a higher amount if need be, because you have established a credit record with this kind of lender.
Online loans are a helpful bridge if you have a cash flow problem. But an online payday loan, when you step back and look at it, is very expensive, with annual percentage rates that can approach or exceed 300 percent. And some lenders have threatened delinquent borrowers with check fraud and criminal prosecution for repaying late. And although that practice is illegal in many places in the United States, it still happens. Generally you’re paying 15 percent right out of the box for a loan that lasts two weeks. If you borrowed $100 and kept folding over that loan and paying the interest every two weeks for a year, you’d pay $390 in interest, plus repay the original $100.
Online loans are convenient and can be lifesavers, but be careful.