Are you searching for more information about payday loans? If yes, you should know that payday loans explained here. Payday loans are short-term financial solutions that provide fast cash to people facing unexpected emergencies. Lenders typically offer these loans directly rather than being included in credit card offers. Many different payday loans are available, including installment loans, revolving lines of credit, and paycheck advances. Obtaining a payday loan involves:
- Fill out an online form.
- Providing personal information such as bank account numbers.
- Receiving approval within minutes.
If accepted, the borrower receives money deposited into their checking account within one day. Afterward, borrowers must repay the funds over several weeks, usually weekly. Repayment terms vary based on each lender, but most require full repayment within 30 days.
Legal Status for Payday Lending
The cost of payday loans depends on your state. Most states allow lenders to charge interest rates well above 300%. In some cases, such as Alabama, New York, and Texas, the annual percentage rate (APR) can exceed 400%. Most payday lenders operate online.
In some states, consumers cannot borrow money directly from a payday lender. Instead, they must go through a third party, typically a check cashing store or pawn shop, to obtain the cash needed to repay the loan. These third parties are sometimes referred to as “middlemen.” They charge fees for processing the loan, including upfront and ongoing fees. Some middlemen require additional fees for late payments. Many states limit how much a consumer can earn while working part-time jobs without losing eligibility for public benefits. This makes it difficult for low-income workers to repay their loans.
Fifteen states and the District Of Columbia protect their borrowers from predatory payday lending practices by setting reasonable rate caps. Idaho, Missouri, and Utah allow payday lenders to offer slightly cheaper loans with shorter lengths.
How much money can I get with a payday loan?
A payday loan is a short-term small-dollar loan that allows borrowers to borrow up to $1000 without providing collateral. A lender will give you cash based on the value of your next paycheck. You are expected to pay off the loan within two weeks. In some states, lenders offer even larger loans called Installment Loans. These loans allow you to borrow up to $5,000 and repay over several months.
Each state regulates payday loans. Some states require a credit check, while others do not. To find out how much money you can get with one in your state, type your ZIP Code into our tool.
How can I find a reliable online payday loan?
The Consumer Financial Protection Bureau warns consumers about the dangers of getting an online payday loan from unlicensed lenders. These unlicensed lenders are often expensive.
The best online lenders don’t require borrowers to provide proof of income, employment history, or bank statements.
If you’re considering applying for one of these types of loans, make sure you do some research beforehand. There are legitimate online lenders, but scammers are trying to take advantage of people. You’ll want to check the BBB’s ratings and read customer reviews to see how well a particular lender treats its clients.
Steps to take before applying for Payday Loans
Payday loans are one of the most common types of short-term credit, but many people still aren’t aware of how much money they could potentially borrow. In fact, according to data compiled by NerdWallet, the average borrower takes out $500 in cash over 30 days. While it might seem like a lot of money, it’s less than half of what the typical American household spends each month. However, there are some things you should know about payday loans before applying.
Understand the basics
A payday loan works similarly to a traditional bank account — except it doesn’t require a monthly payment. Instead, you pay off the entire amount due within a certain number of weeks, usually 14 to 31 days. But unlike a bank account, you won’t receive interest payments unless you fail to repay the loan. And while you’re paying down the principal, you’ll also accrue additional charges.
If you already have a checking account, you probably have enough funds to cover a few weeks’ expenses. If you don’t, you may want to consider another way to fund your spending. Perhaps you could use a debit card, apply for a credit card or even sell something online. You may find that you can save money by doing so.
Do the math
The APR associated with a payday loan varies depending on the lender, but it typically ranges between 300% and 459%. This means that the cost of borrowing will vary based on the length of the loan. So if you plan to borrow $300 a week, you’d likely pay somewhere between $30 and $45 per day.
Know your rights
You may be able to negotiate lower rates or avoid late fees altogether by taking advantage of protections offered by federal law. For example, the Equal Credit Opportunity Act prohibits creditors from discriminating against applicants with bad credit scores. The Fair Debt Collection Practices Act protects consumers from abusive debt collectors. And the Truth in Lending Act requires lenders to disclose all loan terms clearly and accurately.
Don’t forget to ask questions.
Before signing any documents, always ask whether you need to complete an application, sign, or return anything. Also, ensure you understand all fees and costs associated with the loan. Some lenders charge extra fees when you roll over your loan, which is when you continue making payments after the initial term has expired.
Reasons why you might have been rejected
There are several reasons why your application for a payday loan is denied. Some of those reasons include:
- You’re not employed, or your income isn’t enough. If your income isn’t sufficient to pay for basic living expenses and make loan payments, lenders may reject your application for fear that the lender won’t recover the loan.
- You already have a payday loan – Most states allow borrowers to take out no more than one payday loan per calendar year.
- In some states, you may be able to borrow up to $1,000 – Depending on the state, lenders may set limits on how much money you can borrow at once.
- You have too many current debts – Lenders generally don’t consider your credit history unless you’ve had a recent bankruptcy or foreclosure. They’ll want to know your debt obligations and whether you plan to use the proceeds to pay down existing debt.
How Do I Repay a Payday Loan?
Lenders typically require borrowers to pay back the entire loan within a certain number of days, called the “due date.” This might be 14 or 21 days after the day the lender granted the loan. In some cases, the borrower must repay the loan by their next paycheck.
If you have taken out a payday loan and find yourself unable to repay it, there are a few things you can do. First, you should contact the lender and explain your financial situation. Many lenders are willing to work with borrowers to create an affordable repayment plan.
If you cannot agree with the lender, you can also consider refinancing the loan with a different lender. This option may be more expensive in the long run, but it can provide you with the immediate relief you need.
Finally, if you cannot repay the loan and have no other options, you can consider filing for bankruptcy. This should be a last resort, as it will significantly impact your credit score.
Do I Need a Bank Account to Get a Payday Loan?
When you take out a payday loan, the lender typically requires you to provide your bank account information. This is so they can deposit the loan amount into your account and set up automatic withdrawals for the loan repayment. The lender will also likely run a background check and may request additional information from you, such as proof of income.