Payday loans are short-term loans with high-interest rates that are typically due on your next payday. These loans can become really expensive loopholes if not dealt with on time. In this loan, the borrower lends an amount from the lender based on his income and is obliged to pay the debt by their next salary.
Basic Characteristics of Payday Loans
- Since these depend upon how much you earn, you need to attach a pay stub when you apply for a payday loan.
- These are paid when the borrower receives their income. As a borrower, you provide the lender with a check of the amount, including the interest.
- Generally, the due date is within a month, and the particular date is set in the deal between the two parties.
- If the borrower delays the payment, the lender has the right to withdraw the amount electronically, especially in the case of online payday loans.
- The amount of the loan, on average, is $500. Of course, you can borrow more or less than this per your income. This is a common payday loan limit for most states.
Will My On-Time Payment Improve My Credit Score?
Usually, this doesn’t happen since there are very slim chances that the lender would report a payday loan payback to the credit bureau. So payday loans for bad credit don’t work that well.
However, if you do not make the payment on time, the lender might complain to the bureau, damaging your credit score.
How Much Would a Payday Loan Cost Me?
According to the Consumer Financial Protection Bureau, the average interest that lenders can charge online payday loans is around $10 to $30 on every $100. So if you borrow a loan for two weeks of around $100 on $13 interest, it would add up to an Annual Percentage Rate of around 400%.
How Are Payday Loans Online Dangerous?
Payday loans can be very dangerous if you fail to follow the right procedure and meet the deadlines. If you do not make full payment on the first payday, an additional interest fee will become a part of the loan. If you again fail to repay in complete, another extra fee will be added, and this cycle will continue until you make the payment in whole.
It can make borrowers pay three times more interest fees than the actual loan amount. This is why it is dangerous: getting out becomes very difficult once you get in.
Are the Limits the Same for All States?
No, every state has its own rules and regulations. Some states permit payday loans, while others strictly prohibit them. It may be because the state does not regulate payday loans, or the lenders do not offer their services because the interest rate does not go well with state regulations.
You can read more about your state online to determine whether it allows payday loans.
Who Should Apply for a Payday Loan?
Payday loans are fast, and you can get them on an urgent basis to sustain you until your next paycheck. However, it is more costly and risky than the advantages it offers. You pay an extra interest rate and bear the burden and pressure of the money adding to it, especially if you cannot afford to pay back the additional fees.
How Can I Get a Payday Loan?
Getting a payday loan cash advances can be a bit difficult. Even though you fulfill all the requirements, there is no guarantee they will issue you a loan. You can find lenders through brick-and-mortar stores or, even better, online. However, always go for professional payday lenders. That’s because even if they charge you more, they know how to play by the rules. Customers with credit difficulties should seek credit counseling before entering into any loan transaction. We do not recommend general or inexperienced lenders because they follow their own ideas more than the state’s rules. However, if you go for an online payday lender, make sure you choose instant payday loans online with guaranteed approval.
Here are some of the basic requirements you need to apply for a payday loan:
- Be at least 18 years of age
- Have a steady income
- An active bank account
- Income proof
- Valid identification
The lender won’t ask you questions if you can pay the loan or not. They collect the information and release loans depending on their ability to get payment. They may very well lead you to a debt trap that would make you lose your mind.
Are There Any Alternatives to Payday Loan Online?
Yes, there are, and we suggest you to go for title loans, alternatives instead of payday loans.
Ask a relative or friend to lend you a loan: Before you go out to ask people, try borrowing money from your close ones. It can be difficult to keep aside your pride and ask for it. However, this is a good option to save yourself from huge interest rates.
Request an advance from your employer: You could ask your employer to issue you your payment in advance so you can deal with your expenses. This works the same as the payday loan but without hefty interest. Also, there is a good chance your employer might accept your offer.
Talk to the lender: Last but not least, some lenders are thoughtful, and upon explaining, they can agree to help you out. Many of them are willing to offer new options to let you establish an income so you can pay up your loan soon. This should be the last option but can be a good try.
Borrowing a payday loan is easy and fast, but the outcome can be very ugly. Before you decide to apply for it, make sure you bear in mind all the pros and cons. Also, it is important to calculate all risks, and have a clear vision and a good payment plan in your mind.
We hope this article gave you the answers you were looking for. Happy Exploring!