The main purpose of a payday loan is gaining access to the money you need, despite having bad credit. It’s essentially a short-term loan that will carry you through your next payday. Let’s face it, life happens. Many customers use payday loans to help them get through a tough week or month. It’s not uncommon to encounter a problem that requires money that you simply don’t have. If you find yourself in this situation, you’re not alone. During these difficult times, you have the option of getting a payday loan.
The terms of a payday loan will vary from on lender to the next. Sometimes the terms are a couple of weeks, while other times you’ll be required to start paying back the loan on your next payday. There are even payday lenders that allow repayment of loans over a period of 30 to 45 days. The terms available for payday loans vary significantly and are based on your pay schedule. Let’s take a look at how payday loans work.
Credit Checks for Payday Loans
There are some lenders in the payday loan market that say they don’t use credit checks, but that’s not usually the case. While some may not run a credit check, most do. In many instances, credit checks are run and loans are approved, even when the credit score is low. If you have a poor credit history, there is a good chance that you can get approved for a payday loan, but it will depend on the lender and nature of the credit issues that exists. Payday lenders help many customers that would not qualify for a loan from a traditional bank. Whether you need $300, $500, $1,000 or $1,500, a payday loan is a viable option.
Approval Process for Payday Loans
It usually only takes a few minutes to apply for a payday loan. As a result of innovations in technology, the application process is usually online, which means you can provide all of the required information without having to visit a lending institution in person. This has made the approval process much easier. In fact, there are times when you will receive an answer about your application within minutes of submitting your information. There are some instances when an initial approval is provided and the application is finalized later. This happens when you meet the requirements of the lender and it’s just a matter of verifying the accuracy of the information provided.
There are basic requirements for getting approved for a payday loan. For instance, you must be a resident of the United States and at least 18 years old. You must also have a checking account and earn a consistent income. One of reasons why you might be denied a payday loan is because information provided is inaccurate. This can happen even if the inaccuracy was a mistake. Notably, there are many customer that think they will not qualify for a loan but are able to receive the money needed. The best part is that you can get the money you need quickly, sometimes within one business day. Most payday loan applications can be completed on a desktop computer, smarthphone, tablet or laptop.
Payday Loan Fees
Instead of compounding interest, sometimes payday loans are based on fees. This works by expressing fees in the form of an annual percentage rate (APR). For instance, if there is a fee of $17 on $100, the interest is then 17%. Notably, the fees charged on a payday loan often decrease when a higher amount is borrowed. Information regarding the fees will be provided during the application process. It’s important to consider how much a payday loan will cost before you make a decision to secure the loan.
Facts About Payday Loans
There are many reasons why consumers choose payday loans. While most of the time it’s for the reasons already mentioned, sometimes it’s because they want to avoid using credit cards because of the interest rate. Depending on the type of credit card you have, it’s possible that getting a payday loan will be cheaper than charging your credit card. Since payday loans are paid off over a short period of time, you won’t end up with a high balance, which is often the case with credit cards, especially if you’re accustomed to only making the minimum payment.
Another reason why a small payday loan is prudent for some consumers is because it enables them to avoid fees incurred when a checking account is overdrawn. This is a problem that can be exponentially more damaging because you have to deal with fees from the bank and repercussions from the person or institution that attempted to cash the check. Since a payday loan is a fast solution, you can usually resolve the problem before it expands.
If you currently have bad credit and you’re working on improving your credit score, a payday loan can help you achieve that goal. For starters, it can prevent you from making late payments by providing the money you need to cover bills. It can also help you establish credit if you pay back the loan in a timely manner as agreed. Although payday loans should not be the primary solution to your money woes, they can certainly help you get out of tight situations.