Payday loans are a popular form of short-term, “emergency” financing.
They can be expensive (upwards of 300% APR) and they always must be paid back with interest.
However, if you need money to pay for an unexpected expense or to solve a temporary financial crisis, a payday loan might be your only option.
If this is the case, it’s important to understand how these types of loans work so you can make an informed decision about whether or not you should apply for one. Keep reading to learn all about payday loans…
How Payday Loans Work
Payday loans are easy to get. All you have to do is go to a local bank, credit union, or small private lender and ask for a payday loan.
The lender will check your credit score, verify your employment information and give you a cash advance on your next paycheck. (Note: This is usually not a check from your employer – it’s a check from the lender.)
The amount of the advance will depend on several factors, including your credit score, how much you need, and when you need it.
If you are turned down for a payday loan from a lender, don’t despair. Many people who apply for a loan are rejected. It happens all the time and there’s nothing you can do about it.
When this happens, your only option is to go back to square one and try again with another lender. Don’t give up – keep trying until you find one that will give you a loan.
How Much Do Payday Loans Cost?
The cost of a payday loan varies widely from state to state and from lender to lender. However, on average, the APR will be between 300% and 900% and the amount you have to pay back (including all interest and fees) will be approximately double the amount you get as an advance. This is a very expensive way to borrow money.
What Kinds Of Payday Loans Are Available?
There are two primary types of payday loans:
A “rollover” payday loan is simply a regular installment loan that is paid back over a period of 30-days. The APR on a rollover payday loan will almost always be higher than the APR on a one-time-only payday loan.
A “one-time” payday loan is similar to a one-time personal loan or credit card in that you only have to repay the loan once and it will never be collected again.
Pros and Cons of Payday Loans
Payday loans have several advantages.
- One of the biggest is they are very easy to get.
- Another advantage is they are very convenient.
They also have drawbacks:
- They could be very expensive. Lenders will often charge you interest rates as high as 900%!
- Another drawback is they are not considered a legitimate form of credit by most banks and credit unions so they can’t be used to consolidate other debts or for any type of financing over 6 months to a year.
- A final drawback is there are some states (like New York) where it is almost impossible to get a payday loan because of the many regulations that are in place to protect consumers.
No matter what you think about payday loans, they are here to stay.
They may be expensive but they are very simple to get and they give you the cash you need without having to wait around for a traditional bank or credit union to process your application. If you decide to use a payday lender, make sure you shop around and find one that has a good reputation and a decent interest rate.
There are now online payday lenders that will let you apply for a loan from the comfort of your own home and get the money deposited in your bank account as fast as the next business day.
These types of loans are often referred to as “online payday loans: and they work much the same way as a traditional paper-based payday loan. The only difference is the lender is an online entity rather than a local lender.
Should You Borrow From A Payday Lender?
That depends. If you truly need the money and you can qualify for a reasonable loan with fair and reasonable terms then by all means go for it. Just make sure you do your homework first!
Should you use a pawnbroker?
Absolutely not! A pawnbroker is not a lender. He is an entrepreneur who has been given the privilege by the government to buy merchandise from people who are struggling to pay their bills. Many pawnbrokers are honest but many are not.
And those that are dishonest can do a tremendous amount of economic damage to you. Pawnbrokers are not regulated so there is no way for you to know whether or not they are going to charge you hidden fees, try to trick you into buying items you don’t want, or simply refuse to return your goods.
In fact, in some cases, they may even try to “eat” your equity by charging you exorbitant interest. The only safe and legitimate type of alternative to borrowing from a bank or credit union is borrowing directly from someone who is willing to lend. And that someone is almost always a private individual rather than a business entity.
Should you use an online lender?
Yes, if you can find one with fair and reasonable terms. But again, do your research. Make sure the lender is legitimate and has a good reputation and a decent interest rate.
Should you use a traditional lender?
Only if you cannot obtain a loan from an online or an online-type lender. In any case, please be careful. Please do not use any type of financing unless you are certain you can repay it. Please do not overload yourself with debt. Please pay back every penny you owe. These types of loans should be considered a “last resort” and only when all other options have been exhausted.
Remember… Borrowing Is Hazardous To Your Wealth And Financial Health!
Please take the time to educate yourself about all of your available options. Make an informed decision rather than making the decision based on emotion or “gut feeling.…Read More
Payday loans are helpful for people who need quick cash and don’t have access to traditional sources. They are an option for those who may not be eligible for other forms of lending.
Payday loans can be costly, and there is a chance that the borrower may default on the loan, which can lead to hefty late fees.
In reality, they’re loans you want to use as a last resort.
If you still need to use them, here are some tips to help you stay safe:
1. Check your credit report before you apply for a payday loan. If there are any negative items on your credit report, it could affect your ability to get a loan from a lender.
2. Make sure the amount you are borrowing is less than or equal to what you would be able to get from an unsecured personal loan at a very high interest rate.
3. Consider getting extra cash flow by taking out multiple small loans instead of one large one. This will spread out your payments over a longer period of time and give you a chance to catch up on your bills without having to worry about running out of money for a very long time.
4. Conduct periodic reviews of your budget to make sure you are staying within your means, and if you start to go into debt, stop using the loan before it gets too late.
List of alternatives to payday loans:
1. Sell something on eBay (if you have something valuable to sell)
2. Use a credit card to get cashback rather than using a credit card to buy things you don’t need
3. Ask your parents or friends or whoever else you trust for short term, low interest loans against the value of your future earning potential
4. If you are willing to travel, you can find part-time or temporary work as a house sitter or caretaker for an elderly person or people with pets. House sitting is a great way to meet people in your area who may need help with their home and to make some extra money.
5. Contact your local church or a charitable organization and see if they can help you out
6. Contact your local social services office and see if they can help you out
7. Consider getting extra cash flow by taking out multiple small loans instead of one large one.
How to apply for payday loans online:
1. There are many websites that offer to connect you with lenders. If you are applying for a payday loan online, you should only use websites you trust. This means websites that are regulated by the government, or at least operated by a reputable company.
2. Be wary of websites that ask for a great deal of personal information. Some scammers will set up fake websites which look real, but they are really designed to steal your information.
3. Make sure the website you are contacting provides instant approval.
This is especially important if you are contacting several different lenders because if you don’t get approved by any of them, you could end up losing your money and having to contact the website multiple times for “rejection” just to make sure you aren’t dealing with a scammer.
Payday loans are legal in most US states
However, some states have laws against certain lenders operating within their borders.
It is important to check with your state’s financial regulators to find out if there are any restrictions against using payday loans in your area.
If you live in an area where it is illegal for lenders to operate, you can still apply for a loan by using another method. You may want to consider using a pawn shop instead of a lender who is regulated by the government.
This is especially true if you have bad credit or no credit at all.
Just because a lender is not regulated by the government does not mean they are not legitimate. Legitimate lenders will disclose the interest rates and other terms of their loans before you sign anything.
Scammers will attempt to mislead you into believing that you are getting a great deal, when in fact, you are signing away your rights and are forced to pay an outrageous amount of interest.
When should I use payday loans?
The answer is simple… whenever you need money fast!
Payday loans are not for long-term use. They are only meant to be a short-term solution for emergencies. However, for many people, payday loans provide a much-needed “breather” during difficult financial times.
If you can afford to pay off your loan on time, then you probably do not need this type of financial assistance.
However, if you cannot afford to pay back your loan on time, or if you have a valid reason (like an emergency) why you cannot afford to pay it back, then you should consider using a payday loan.
Remember, the best way to make sure you do not end up with a problem loan is to learn all about it before you sign anything. That’s why I’ve written this guide which will hopefully answer most (if not all) of your questions and put an end to any fears you may still have about using these beneficial loans.
If you decide to apply for a payday loan anyway, at the very least be aware of what you are getting yourself into… so you can make a fully informed decision as to whether or not this is the right financial solution for you.…Read More
Payday loans are designed to help people who need some extra cash right away, but can’t get a traditional loan from a bank or credit union.
These high-speed loans, also known as cash advance loans or cash advance loans, allow you to borrow up to $1,000 for as long as 30 days.
The money will be deposited directly into your bank account as soon as the next business day.
#1. How do online payday loans work?
It’s very simple.
You go to a payday loan store near you and you fill out an application.
The employee will then examine your credit history and, based on that information, he will determine whether or not you are eligible for a short-term, small-dollar loan.
If you are eligible, he will then give you an estimate of how much you can expect to be loaned. You will then be given a certain number of days (usually 30. to repay the loan with interest.
If you do not repay the loan in full within that time period, the loan company will automatically renew the loan for another 30 day period and begin charging you interest on the unpaid balance.
If you do repay the loan in full, the loan company will write “canceled” on your account and you will no longer be responsible for paying any further interest.
#2. Who can get a payday loan?
Anyone who has a checking or savings account is eligible to request a payday loan.
It’s also possible for anyone who is “verified” to get a loan (see below). Verification is easy and only takes a few minutes.
There’s no verification fee, no credit check and you can get up to $1000… no matter what your past lending history says!
#3. What fees are associated with payday loans?
The fees associated with payday loans may include:
1) Origination fee: This is the fee for providing the loan.
2) Loan fee: This is the charge that accrues each day that you carry a balance on your account (the days between when you take out the loan and when it’s due to be repaid).
3) Payment processing fee: This is an additional charge charged by a lender.
#4. What are the requirements to get a payday loan?
You must be a U.S. citizen, at least 18 years old, have a bank account, and a checking or savings account.
Basically what this means is you can get a payday loan with no job, no income verification whatsoever.
There are many websites that allow you to fill out a form and instantly receive a list of companies that would be happy to give you a payday loan.
You then choose one of those companies and, if they accept you, they will send you a cash advance check in the amount of $100 to $1000.
You then use that money to repay another company or to pay your bills.
#5. Can you get more than one payday loan?
The short answer to the question is: yes. You can get more than one payday loan.
But what should not be done is to take out a second or third payday loan without first paying back the first.
This creates a cycle of debt that becomes increasingly difficult to break out of.
Payday Loans are an Excellent Way to Access Cash Quickly
(When You Have No Other Options)
Payday loans can also quickly drain your finances if you use them inappropriately.
Always remember to consider all of your options before using any type of loan.
As a general rule, the best option for getting emergency cash is to have enough saved to cover at least three to six months’ expenses.
If you don’t already have this amount socked away, you should seriously consider putting something aside on a regular basis.
Having said that, sometimes it’s impossible or extremely difficult to save this much money.
For example, if you have a very low-paying job or are just starting out in life, it may take you years to amass even a small nest egg.
In this case, you may have no other choice but to access a short-term loan.
If this is true for you, use the tips in this article to help make sure you get the most out of your payday loan.…Read More