If you need cash fast and you have bad credit, a payday loan is a viable option. Many people that are gainfully employed find themselves in a situation where there are many days left before getting paid and an emergency arises that requires quick cash. In fact, the mission of many payday lenders is to meet that need. Payday loans are exactly as they sound: a loan that you pay back with your next paycheck. The terms of payday loans vary and are based of the requirements of each lending institution. Below you’ll find helpful information about payday loans.
Payday Loans and Bad Credit
If you have bad credit, there’s still a good chance that you will qualify for a payday loan. While there are certainly requirements, having bad credit doesn’t mean you won’t qualify. Many consumers that have attempted to get funding from a traditional bank were unable to do so, yet qualified for a payday loan. The actual mission of many payday lenders is to meet the needs of consumers with poor credit. Although not everyone will qualify, there’s a much greater chance of getting the money you need from a payday lender than most other financial institutions.
Applying for a Payday Loan Online
Gone are the days when applying for a loan required you to walk into a bank and submit a paper application. While that’s still an option, most payday loans have an online application process that takes just minutes to complete. In addition to filling out the application quickly, you will also receive a decision in a matter of minutes. This has been made possible because of innovations in technology that enable payday lenders to gather information in seconds that would have taken hours or days a decade ago. Generally, you won’t even have to fax or send in documents. The entire process takes place online.
What’s Required to Qualify?
Although each payday lender will have their own set of guidelines, there are some universal requirements. For instance, you will need to be a United States resident, be at least 18 years old and have a banking account. You will also need to have a regular source of income. If you don’t have any of these requirements, your application will not be approved. Notably, one of the main reasons why an application for a payday loan is not approved is because of inaccurate information.
Payday Loan Fees
In many cases, payday loans include fees instead of compounded interest. However, the fees are often expressed as simple interest. For instance, a $100 loan that has fees totaling $16 is essentially a loan with 16% interest. Amounts for payday loans vary. Some of the most common loan amounts are $300, $500, $750 and $1,000. When applying for a payday loan, it’s important to make sure you have an understanding of the fees and all other terms.
Paying Back a Payday Loan
The terms for a payday loan will depend on the lender. While there are some consistencies, it will often vary. For instance, you may be required to pay the loan back by your next paycheck. However, there are also loan repayment plans that are longer, including some that are 45 days. The terms of a payday loan will be negotiated during the application process. You will likely be offered repayment terms that align with the loan amount and when you get paid.
Non-Payment of Payday Loans
In the event that you are unable to repay a payday loan, the lender will engage in the collections process. The purpose of initial collections is to identify repayment arrangements that work for you. While this process starts out internally, the lender will often work with a third party when efforts to collect are unsuccessful. Non-payment of a payday loan may be reported to one or all of the credit bureaus, including Equifax, Experian or TransUnion.
Other Facts About Payday Loans
There are many common reasons why people choose to get a payday loan. For some, it’s a better option than charging a credit card with high interest rates. However, this will depend on the fees associated with the payday loan and the interest rate on your credit card. In some instances, a payday loan ends up being a more cost-effective solution for resolving your financial burden then using your credit card.
Some consumers choose to get a payday loan to cover the cost of a bill that would otherwise be paid late. This could be a viable solution, especially if your goal is to build your credit and improve your financial situation. Keep in mind that payday loans should only be used in an emergency. It’s worth noting that applying for a payday loan will not likely have a negative impact on your FICO credit score like applying for a traditional bank loan. However, each financial institution is different.
Without a doubt, payday loans can be helpful when you’re in a bind. However, they should not be used as a long-term solution. Payday loans are intended to solve a short-term problem that involves a financial need. It’s important to be responsible when using payday loans to avoid compounding any financial problems that you have. Once you have resolved the emergency, you might find it beneficial to work with a financial advisor to prevent the problem from reoccurring.