Although there is no right or wrong way to define what a payday loan is, we can summarize it as short-term, high-interest-rate loan that is typically less than $500, and they are often due for payback on the next payday of the borrower.
Based on the law governing your state of residence, the application may be done easily on our site or by going through the hassle of visiting payday lenders.
After reading this article, you should know the following;
Common Features of Payday Loans
- Payday loans are relatively small in comparison to traditional loans, although the appropriate amount you can get for a payday loan depends on the state law that exists where you reside. The common loan limit is usually $500; however, it can rise above that in some states.
- The loan is often repaid in full on the borrower’s next payday or when they get paid from other sources like Social Security or pension. The loan is usually due in two to four weeks after receiving the loan. The agreement has in it the specific due time for the loan.
- To pay back the debt, your creditor usually demands a post-dated check for the full sum of the money, which usually includes the initial sum, the interest, and other fees attached. Rather than present a check, there is the option of providing the lender with an authorization to debit the owed sum and other fees electronically from your bank account.
- The payday loan lender generally does not use your ability to pay the debt after meeting your financial obligations as the basis for granting the loan.
- The proceeds from your loan are usually paid to your account electronically, by check or cash. Based on the policy of your lender, you may be given a pre-loaded debit card.
- The features for small loans vary from state to state. As such, don’t attempt to use these as a basis for determining if you should take a non-payday loan.
- The duration for paying off a state loan is the next payday. In some states, the borrower can renew or rollover a loan when the borrower finds it difficult to pay at the scheduled time; this gives the borrower more time to pay up the loan. If there’s a loan renewal, the lender extends the due date for the loan, and the borrower is obligated only to pay the fees due at the initial due date.
How They Work
To get a payday loan, the borrower has to apply directly from the lender or through a licensed third party that occasionally offers the intending borrower many payday lenders they may like to opt for instead. You should apply through a third-party site like ours especially if you had taken some bad credit loans before. This is because we have an array of over 100 direct payday lenders with juicy offers that you can choose from. You just need to fill a short hassle-free application form, and you’re good.
During the payday loans application process, the borrower is expected to provide some vital information such as employment information, proof of income, and more.
The lender verifies if the documents submitted are genuine, and they can choose to deny or approve the loan application after proper vetting. On approval, the lender can then provide his/her details for the proper disbursement of funds. Generally, the payment is received with 24-48 hours.
Before approving a loan, the lender demands that the borrower permits it to withdraw the agreed sum of money from the account of the borrower. The loan becomes due the moment the borrower gets his/her paycheck.
A payday loan is also called no credit check loans, salary loan, a payday advance, and cash advance loan.
How Much Can be Borrowed
The sum of money a borrower can have access to is determined by a lot of factors such as the state law governing payday loans in the borrower’s state of residence. The average lending cap usually ranges from $300 to $1,000.
The lending cap does not ultimately determine how much money a borrower can have access to; some other factors also come into play. Payday lenders sometimes check your lending history, expenses, and income to determine if you can afford to pay back the money at the right time, and how much is convenient for the borrower to pay back. The easier it is for the borrower to pay back, the more likely he/she keeps to the due date.
The Requirements for a Payday Loan
There are details that a payday loans lender requires from the borrower before a loan application is approved. Some of those requirements are a result of the policy of the lending institution or the state law that regulates what is permitted and what is not.
The general requirements to qualify for a payday loan is that the lender must be up to 18 years of age, must have an active bank account, and should have a source of income.
Payday lenders can still reject the application if the borrower is guilty of the following;
- Not earning enough. Lenders expect that you earn at least $500 on a monthly basis. That’s the minimum, and it can only qualify you for a small amount of money.
- Not meeting up with the requirements for repayments. Every state has laws that determine how much of a borrower’s income can be used to service debt. Every lender uses this to determine your eligibility for the loan and your loan cap.
- Having an unpaid loan. A payday lender can deny a borrower with unpaid loans. Payday lenders have the tools to track loans, and they won’t hesitate to use these tools if you’re borrowing an amount of money that is significantly high in comparison to your income.
- Recently filed for bankruptcy. If a lender finds out that an intending borrower recently filed for bankruptcy, it may affect the chances of the intending borrower to be granted access to the funds because bankruptcy cannot be filed twice within a period of seven years.
- Just opened your first bank account. An intending borrower who recently opened a bank account won’t be given the payday loan except in some circumstances.
Cost Associated with Payday Loans
It is quite common for the payday loans lender to charge a 15% interest rate while some lenders charge as much as 30%, which is $30 on every $100 you’re given. As such, a borrower needs to be careful of the frequency with which he/she takes a payday loan as it can leave one neck-deep in debt.
Can a Payday Loan Help Build Credit?
Payday lenders hardly report on-time payments to the credit bureaus; as such, your credit score stands the same. But, in an instance where the borrower defaults in paying, the lender has enough time to report to credit bureaus, and if they sell your debt to a collection agency, then such agencies usually report to credit bureaus.
How to Choose a Payday Loans Lender
To choose the right payday loans lender, it is of utmost importance that an intending borrower visits the right source to seek necessary information. And what better source of information can be better than a website such as ours that connects an intending payday borrower to over a hundred payday lenders where he/she can make a comparison of offers from lenders.
Before searching and applying for a payday loan, the intending borrower should estimate how much money is really needed and what is left after repayment. A lender should always have it in mind that the more money he/she takes from a payday lender, the higher the interest.
Now, from the list of lenders on our website, an intending borrower should first write down the ones that appear to have the most-desirable benefit, and then get as much information as possible on each payday lender.
As an intending payday borrower, you should take note of their repayment terms, interest rates, and late charges. If this information is not available on their various sites, then you can contact them by walking into any of their contact centers or giving them a phone call. Avoid taking a payday loan from a lender that refuses to give you a breakdown details of your repayment.
Also, you need to investigate the time it takes for each lender to approve or deny your application request. A good payday lender approves or rejects a loan in less than 24 hours.
It is also necessary that the time between loan approval and deposition of funds is short, although this varies with the amount and time of approval. Loans approved on a Friday can take days before they’re disbursed.
Advantages of Payday Loans
Here’s why a payday loan may be the best choice for you as an intending borrower:
1. They’re easy to access
The most attractive feature of a payday is that it’s easy to access. Anyone can apply and get a loan from most payday lenders in less than 24 hours. Some payday lenders are available to attend to your loan application 24 hours a day and seven days a week. The process for applying for most payday loans is under five minutes, unlike the traditional loan that usually takes days and lots of paperwork.
2. The requirements are fewer when compared to traditional loans
Most payday loan lenders can ask that an intending borrower provides an active bank account, SSN or government-issued ID, and proof of income, but the requirement for getting a traditional loan is more than that. You need a photo ID, Social Security number, credit check, address verification, proof of income, and other information.
3. Payday loans are unsecured
Unlike the requirements for taking a traditional loan, payday lenders approve loans without asking that the intending borrower secures the loan with his/her personal property.
4. Consumers are protected
There are many regulations that ensure that an intending borrower is treated fairly during the application process. For example, the payday lenders connected to us have well-described terms and conditions to ensure that an average intending borrower understands the cost of purchasing a loan. It is a practice that is required by the Federal Truth in Lending Act (TILA). 34 states in the United States of America also have laws in addition to federal regulations that dictate the process.
Common Payday Loan Mistakes to Avoid
If you’re comparing loan options, you need to consider certain factors; this way, you won’t fall into some common mistakes such as those below;
- Taking several loans: A borrower may be tempted to take another small loan after completing one, but a creditor sees that as a sign of financial instability. Whether the loan is being repaid on time or not, taking payday loans frequently is a red flag to lenders.
- Delay in repayments: Repayment histories are listed on credit reports. As such, a borrower must keep to the payment schedule as that can hinder his/her chances of getting paid in the future.
- Making several applications within a short period: An intending borrower who wasn’t approved to get a loan should not re-apply immediately. Since loan applications are included in the credit of an individual, it is detrimental for any intending borrower to get a rejection in quick succession as the lender perceives such as an individual as a high-risk borrower. What an intending borrower should do is to re-access the reason for the denial and wait for some months before re-applying for the loan.
- Not checking your credit report: It is important that everyone checks his/her credit report regularly. You should check the report for any sign of identity theft, and also check if the loan is listed appropriately. Checking your credit report as an intending borrower gives you an idea of what your financial situation looks like to a payday lender.
In an emergency, you need a payday lender that is easy to access and can provide the funds needed to take care of the situation. This can mean that you need to consult with numerous payday lenders, and this process can take time. As such, you should use our platform as we link loan seekers with over 100 payday lenders.
Why going through the stress of searching for a payday loan lender when you can just click on “apply now” right here? You’re connected directly to our pool of lenders that are readily at your service.