What is a Payday Loan?
Just as you might have imagined, payday loans are short-term loans until you get your next paycheck. You can receive a payday loan in different increments, depending on what’s offered by the lender. The most common loan increments are $300, $500, $750 and $1,000. The repayment terms for a payday loan will vary based on lender requirements. The information below sheds more light on how these loans work, including commonly asked questions by consumers interested in obtaining a payday loan.
Can I Quality With Bad Credit?
The mission of many payday lenders is to meet the financial needs of consumers that have bad or less than ideal credit. As a result, even if you have a low credit score or other credit issues, there’s a good chance that you will qualify for a payday loan. In fact, many consumers that are unable to qualify for other types of loans, such as traditional bank loans, are able to qualify for a payday loan. This doesn’t mean you will automatically be approved. There’s an application and approval process that’s much like that of any other lending institution, although much quicker.
What’s Involved in the Process?
The application process for a payday loan is fast and simple. Technological advancements in recent years have completely changed the game in that the entire process occurs online. In most cases, you can actually submit an application using a smartphone, laptop or desktop computer. After providing your information on a secured network, it typically takes a few minutes to receive a decision.
The process includes running a credit check, which could mean accessing one or more of the primary credit bureaus: Experian, Equifax and TransUnion. Notably, there are some payday lenders that don’t run credit checks, but most do and they are accustomed to all types of credit scenarios. Although you will find out whether or not you qualify immediately, there are other steps involved in the process. For instance, the initial application phase is followed by a review of the information provided to verify accuracy.
What Are the Requirements?
The basic requirements to qualify for a payday loan include being a United States resident, having a regular income and being 18 years of age or older. You must also have an active checking account. If you do not meet these minimum requirements, you will not qualify for a payday loan. It’s also important to ensure all of the information provided on the application is accurate. In fact, if any of the information submitted is incorrect, your loan request will likely be denied. This is the top reason for a payday loan not being approved.
What Type of Fees Are Involved?
Most payday lenders charge a fee that’s contingent upon the loan amount. The fees charged vary and can depend on several factors and may be expressed in simple interest. It’s important to have a good understanding of any interest and fees charged on loans secured through payday lenders. A payday loan should be a short-term solution to a temporary problem. It isn’t something that should be used regularly over a long period of time given the cost of borrowing money. Additionally, you should only borrow amounts that you will be able to pay back. If you continue to experience financial struggles, consider working with a financial advisor.
What Happens If I Can’t Pay the Loan Back?
Each payday lender will handle the nonpayment of loans according to their internal practices and associated regulations. In the event that a payday loan is not paid as agreed, most lenders will engage in the collections process. They will make an effort to identify repayment options based on your financial situation. If they are unable to collect the money, many will engage a third-party that will make an attempt to collect what’s owed.
Other Important Considerations
There are many reasons why people choose payday loans. While it’s often because of an emergency, sometimes it’s also because they have assessed the cost and chose a payday loan over the use of credit cards with high interest rates. While this will vary from one person to the next, it’s important to make an informed decision about which option is best for you. The reason why payday loans are often preferred over credit cards is because payday loans are paid off over a short period of time, while credit card debt can linger and result if the accrual of interest over a longer period of time. Credit card debt often leads to large balances that some consumers struggle to pay off.
Another reason why some consumers consider payday loans to be a viable option is because they want to avoid incurring the fees associated with an overdrawn check. This is an issue that can sometimes be significantly worse than paying fees and interest associated with a payday loan. Having an overdrawn check can result in fees being assessed by your bank and the payee of the check. A payday loan can also be a way to build your credit by avoiding late payments of a bill. There are many reasons why consumers use payday loans. Regardless of your reason, it should be a well though out decision. You should review the loan terms thoroughly to ensure you understand your responsibilities and what to expect throughout the process.