What Are Unsecured Payday Loans?
As per conventional definition, unsecured loans are the ones that do not require you to put any asset or property as collateral against the amount of money you are borrowing. In case of payday loans, lenders never ask you for any such collaterals; it means all types of payday cash advances are unsecured payday loans. These are small amount of loans that are issued for a very short period of time. Almost anyone can qualify for these loans; the eligibility criteria are very simple – you just have to be a US citizen and at least eighteen years old with a regular source of monthly income and with a bank account where your regular monthly income gets deposited. Even though the loans are unsecured ones, your bank account works as a security against thee money you borrow. Following are some basic facts regarding the same which you must be aware of.
Giving A Post-Dated Check To Your Lender
The exact process of application and approval for unsecured payday loans vary from one lender to another. Some payday loan companies require you to submit a post-dated check for the amount of actual loan that is being issued to you plus the amount of interest and other fees, as applicable. In fact, many lenders deduct certain fees right from the check they issue to you. For example, if you are borrowing $500 of payday loan, you will get a check of $500 from the lender, but when you get that check deposited into your bank account and the processing takes place, you actually less than $500, as certain amount of money is deducted as processing fee and other charges. Likewise, some lenders promise you that they are going to deposit the money you are borrowing (in our example, $500) directly into your bank account, but they actually deposit less than $500, and when you inquire about the same, you are told that certain processing charges have been deducted. In any case, the post-dated check you give to your lender works as a security against the loan you borrow. The payday loan company you are borrowing the cash advance from sends this check for collection on the scheduled due date. That is the reason why most payday lenders prefer to issue loans to only those consumers who have a bank account in their name where their regular monthly income gets deposited.
Authorization For Direct Withdrawal To Your Lender
Alternatively, lenders that issue unsecured payday loans may ask you to authorize them for direct withdrawal from your bank account on the set due date. In this case, the lender gets better security, as they can access your bank account and withdraw the money required for the repayment as per the loan contract. However, it is very important for you to keep in mind that some unscrupulous lenders take undue advantage of such authorization and they withdraw more money than they are supposed to.
If you do not have sufficient fund in your bank account on the scheduled due date, the check will obviously get bounced; likewise, if the lender has got the authorization for direct withdrawal, their request for withdrawal will be dishonored. But, in either case, you are charged a hefty amount of penalty. In case of check bouncing, both
your lenders as well as your bank charge a hefty amount of fee. On the other hand, if the lender has access to your bank account, they will withdraw certain amount of money just to cover the penalty charges. Additional interests are charged for every single day of delay from the due date.