How Payday Loan Lenders Get Their Money Back

Payday loan lenders put themselves at a lot of risk when loaning money. Hardly any of them will do background checks into the person that they are loaning money to and it often means that they will not see their money back for a while. However, to help with this, payday loan lenders have a few tricks up their sleeve.

The main way to help ensure that they will get their money back, payday loan lenders keep the interest rates high. They understand that the first 31 days can be difficult and the only way they can get people borrowing money is by offering low rates at first. However, after those 31 days, the interest rates will go up. Many payday loan lenders have an APR of over 1000 percent so that they can guarantee that people will pay back the money.

Another way to ensure the money will come back without having to do a credit check is to set requirements. These requirements will differ between payday loan lenders but there are some that are extremely common. The main one is that the borrower is over 18, which is a requirement for many companies to put in.

Being in full time employment is another requirement for many payday loan lenders. This can help to ensure that money is being earned and that the person can afford to borrow money. However, there are some payday loan lenders that will tweak that requirement slightly since there are many people who have lost their jobs due to redundancy or are having to work part time so that they can afford child care. These payday loan lenders will set other requirements so that these people can borrow the money that they may desperately need.

There are some payday loan lenders that have the requirement that you have a debit account so that a direct debit can be set up. This helps them to know they will get their money back because they will simply take the money when it comes to the payday. Not all payday loan lenders will set up direct debits and they will send out reminder emails to ensure that a borrower has not forgotten about the due date for the loan.

Rewards will be put in place by some payday loan lenders so that they can get the money back. One of the most common rewards is by lowering the fee if someone pays the money back earlier than agreed. This is much different to long term loan companies, which will often make you pay an early resettlement fee.

Payday loan lenders do not do credit checks but they will do checks into you. They want to know that you are who you say you are and you do work where you say you do. Sometimes this can be done online by them but there are some payday loan lenders that will ask you to fax your information to them. This can be more time consuming but it will help t o guarantee a larger amount for the loan.