Getting a payday loan is an option for those who need cash quickly and have limited resources. A payday loan is a small loan (up to $1,000) that is paid back when you receive your next paycheck. Payday lenders are businesses that specialize in lending money to people who need quick cash and can’t get it from traditional lenders such as banks or credit unions.
If you meet the eligibility requirements and can verify your employment, you should be able to get a payday loan fairly easily. The benefits of getting a payday loan are obvious: You get fast cash right away, which relieves financial stress and gets you through an unexpected expense with ease.
The cost of the loan, however, needs to be considered carefully before taking one out. Interest rates for payday loans tend to be high – often between 15% and 20% APR on every dollar borrowed (though some states cap this at lower amounts).
What Is a Payday Loan?
A payday loan is a type of loan that people take out when they need cash fast and don’t have an alternate source of funding available. Payday loans are short-term loans that are meant to be paid back in a single lump sum when you receive your next paycheck.
Payday loans are usually very small, quick loans that are issued based on the applicant’s employment status. Since they are issued based on employment, payday loans are generally not available to people who are unemployed.
Generally, the borrower will write a post-dated check to the lender to repay the loan, with the date on the check being the date their next paycheck is issued. The lender will cash the check on the due date and receive the funds necessary to pay back the loan.
Obtaining a Payday Loan
Most payday loan companies will require you to show proof of employment and a valid bank account. However, there are some that will consider your credit score, so it’s always a good idea to do your research. You can apply for a payday loan either online or at a physical branch.
There are a few requirements you’ll need to meet.
- You need to be 18 years old or older.
- You need to be employed (full or part-time).
- You need to have a bank account in your name.
- You need to be a U.S. citizen.
- You need to have a steady source of income.
- You need to have a steady home address.
How to get a Payday Loan
- Choose a company and apply online.
- Provide the information required by the lender.
- Confirm your employment and wait for a response.
- Wait for the lender to deposit the loan in your bank account.
- Repay the loan on your next payday.
Find the Best Payday Loan for you
There are many factors to consider when choosing a payday loan company.
- Loan Amount – The amount of the loan should be enough to cover your expenses, but not so much that you can’t pay it back. You should also keep in mind that bigger loans have higher interest rates and longer repayment periods.
- Repayment Period – The length of the loan should be long enough to cover your expenses, but short enough for you to repay it in a timely manner.
- Interest Rate – The interest rate on your loan is extremely important. The higher the interest rate, the more expensive the loan will be.
- Service Fee – The service fee is the amount of money you pay to the company to process your loan.
- Loan Processing Time – How quickly do they issue your loan? The quicker the better!
- Other Fees – Do they charge additional fees?
Frequently Asked Questions
What is the difference between a payday loan and a cash advance?
A cash advance is a line of credit that you take from your bank account (often at a high interest rate). A payday loan is a small, short-term loan that is paid back when you receive your next paycheck. Because of this, a payday loan is far less expensive than a cash advance. –
1) Can I get a payday loan if I have bad credit?
Yes, but the terms of your loan will likely be less favorable than for someone with good credit. Bad credit will increase your interest rates and make it more difficult to find a lender.
2) What are the alternatives to payday loans?
If you need a little extra cash, a personal loan can provide low interest rates, fairly quick approval and flexible payment terms. Student loans can help you pay for education, and you can refinance once they are paid off.
3) What are some ways to avoid payday loans?
Before taking out a payday loan, try to get an advance on your next paycheck, call your family and friends to see if they can loan you the money, or find other ways to come up with the cash.
Understanding Payday Loans
Payday loans are short-term loans (usually between $200 and $1,000) that are secured against your next paycheck. These loans are typically paid back in 2 to 4 months, so you have plenty of time to repay them.
When you get a payday loan, you write a post-dated check to the lender, pledging to repay the full amount on the date indicated on the check. The lender holds on to the check until your next payday. Once you’ve been paid, you can either deposit that money into your account, or you can give the check to the lender to pay off the loan.
Payday Loan Interest Rates
The interest rate for a payday loan is often between 10% and 20% APR on every dollar borrowed. Some lenders may charge even higher rates, while others may offer lower rates. The exact interest rate you are given depends on your financial situation and the requirements of the lender.
Some factors that affect the interest rate of a payday loan include: Your credit score: Your credit score is the primary factor that determines how much you will pay in interest rates on a payday loan. The lower your score, the higher your interest rates are likely to be.
Your annual income and debt load: Lenders also consider your income and existing debt when determining interest rates. Your employment verification: Lenders will also verify your employment before approving your payday loan.
Efforts to Regulate Payday Loans
The efforts of state and federal authorities to regulate payday loans have been extensive and continuous for the past several years and are expected to continue. Although new regulations are proposed from time to time, including proposals to cap rates or eliminate the payday loan industry, no new laws have been passed to date.
In fact, there have been efforts by payday lenders to circumvent existing regulations and maintain their business profitability by shifting to new technologies and different business models. This shows that the payday loan industry is resilient, and that it will be around for a while yet.
However, payday loan regulations are being refined and improved, and new state laws are being passed that aim to provide more protection to borrowers. Efforts to regulate payday loans are expected to continue, especially as more states enact their own laws to protect consumers.
The cost of getting a payday loan
As we’ve touched upon above, getting a payday loan means that you’ll have to pay a hefty interest rate on the loan. The amount of interest that you’ll have to pay depends on several factors, such as the amount of the loan, your credit score and the term of the loan.
Interest rates can vary between 15% and 25%, depending on your state and the company you choose. If you have good credit, you might be able to get a lower interest rate, but if your credit is bad, you will probably pay a higher interest rate. The term of the loan also affects the amount of interest you’ll have to pay. The shorter the term, the higher the interest rate.
Why it’s important to understand the costs of a payday loan
Payday loans are an expensive way to borrow money, so you should only get a payday loan when you have no other option. You can use a loan to bridge the gap between paychecks, but you have to be careful not to overextend yourself.
Ideally, you should have enough money in your account to pay all of your expenses until your next payday. If you don’t, you can always turn to a payday loan to get you through the tough patch. If you have limited resources, it’s important to know that there are other options available to you.
The first step is to figure out exactly how much you need. You can do this by creating a budget and tracking your expenses. Once you know how much money you need, you can start looking for different options.
The risks of getting a payday loan
Payday loans are expensive and could potentially put your finances in a precarious position. The most important thing to remember is that you should only take out a payday loan as a last resort. If you find yourself in a situation where you don’t have enough money to cover a bill, try to find a less expensive solution.
Talk to your lender and see if you can work out a payment plan or submit a payment arrangement. If you don’t have any other options, it may be worth getting a payday loan. But before you do, make sure you understand the risks of getting a payday loan and the potential consequences of doing so.
Now that you know more about payday loans, it’s time to get the money you need. Start by completing a free online loan application to get matched with lenders that can help you.
Before getting a, consider all of your options. Payday loans, while often helpful, can be expensive. Shop around for a lender and try to find one that has a lower interest rate, if possible.
Consider other resources you have before taking out a loan. However, if you do need a payday loan, be sure to read the contract carefully and understand what you are agreeing to.