You’re in the middle of an emergency. And the frightening truth of it is that you just don’t have the money to afford this. Your next best option, when desperate times call for desperate measures, might just be payday cash loans.
It’s not a fun place to be, though the industry is vast – there are more payday loan stores in the US than McDonald’s restaurants.
What is a payday loan, how can it help you, and should you get one? Keep reading for the information you need to make an informed decision about your finances.
What Is a Payday Loan?
First of all, we need to talk about what a payday loan is.
To put it in the simplest terms, a payday loan is a type of short-term borrowing nominally designed to help lenders in major emergencies. In a payday loan, an individual borrows a small amount at a very high rate of interest.
They’re also called cash advance or check advance loans, and they essentially allow you to borrow money against your next payday.
The basic idea is that instead of facing overdraft fees, late fees for rent or credit cards, or other penalties, you can borrow the money you need to pay off your expenses right away.
It sounds great on principle. But keep in mind that you’ll need to pay off all that you borrowed by your next payday, with a steep interest rate.
How Do Payday Cash Loans Work?
Here’s how it works.
When you take out a payday loan, you typically write a post-dated personal check in the amount you wish to borrow, plus the associated fee.
The lender will give you cash in exchange for the check, and the check will be cashed on the borrower’s next payday (thus, borrowing against your next paycheck).
The interest rates are high – a typical example is $17 per $100 for seven days, which means a 900% interest rate annualized.
This cycle of predatory lending has given the industry a bad name and has led to new rules under the Consumer Financial Protection Bureau.
How Can Cash Loans Help You?
So, can payday cash loans help you?
Yes and no.
If you’re facing late rent, or late mortgage payments, or a late credit card payment, or a major health emergency (or, if you’re impressively lucky, all of the above at once) then the goal of payday loans is to help you put off the damage of paying what you can’t afford.
In that way, payday loans are a lot like a Band-Aid. They provide a temporary fix.
But keep in mind – the money you borrow to solve your financial crisis now will be taken out of your next month’s paycheck with significant interest.
Costs of Payday Loans
How much is significant interest?
Steep. Let’s start with that.
In the example we used earlier, you were facing an interest rate of about 17% on a short-term loan. However, some loans can carry an interest rate of up to 38%, and installment loan interest rates can average over 400%.
Oh, and the fun doesn’t end there, in case you were feeling optimistic.
Penalties and fees are similarly steep for nonpayment or late payment. Some companies will also require collateral. So make sure that you go through an agreement with a fine-toothed comb before you agree to sign anything.
Alternatives to Payday Loans
We get it. It’s not an ideal situation by anyone’s standards. But when times are tight, and you’re flat broke and have a couple different sources breathing down your neck for money, you do what you have to.
In case you didn’t get the message from the steep interest rates: payday cash loans should be treated as a last resort.
Make sure you’ve gone through every avenue first. Ask friends and family if they can help. Pawn something of value, or sell what you have to.
If you can get the money from other routes, it’s best to exhaust those routes first. Then, if you still need money, you should start considering a payday loan.
How Do You Qualify for Payday Loans?
If it turns out that the situation is, indeed, that dire, then let’s proceed to the next step. How do you qualify for payday cash loans?
It’s surprisingly easy to request a payday loan. And bad credit isn’t actually a disqualifier as it is with many other types of loans.
Here’s how you qualify.
Common Requirements for Payday Cash Loans
For starters, in case it’s a concern: you don’t need to be employed to qualify for payday cash loans, but you do need a steady source of recurring income. Otherwise, the lender has no guarantee that you can repay the loan.
You also need to have an open bank account. Which, if late payments are a concern, is probably something you’ve already got covered.
And, as we’ve mentioned, you don’t need to have a good credit score to qualify for a loan. A credit check won’t even be conducted as part of the process. The lender doesn’t hand over the money based on whether you can afford the loan.
They give you the money based on whether they can collect the payment due. Which is why lenders require an open bank account.
How Many Payday Loans Can You Get?
The short answer? It depends.
It depends on what state you live in, what said state’s laws are on payday cash loans, and the lender you’re borrowing from.
Do your homework before you sign on the dotted line – and remember that every loan comes with a steep interest rate.
Getting a Payday Loan
So, how do you get a payday loan?
Aside from the lack of credit check, it’s a lot like requesting any other loan. You complete a request with your desired lender, receive a decision, sign to receive the loan, get the money, and make your payments on time.
How Long Does It Take?
The short answer, again, is it depends.
It depends on how you request from a lender and what lender you request to receive a loan from.
As a rule, lenders tend to act quickly. Which makes sense, considering that payday loans are always short-term loans.
How quickly they act depends on whether you’re requesting online or in person.
If you’re requesting a loan online, you can typically expect to receive a decision and funds within 24 business hours. If you request in person at a payday loan store, you can often get the cash right away, though some lenders will give the funds in the form of a money order.
Paying Off Payday Cash Loans
So, you’ve got yourself a payday loan. Which worked great for the time you needed to pay off rent, bills, credit cards, or whatever you needed to pay off.
Now, you have to deal with paying off the loan itself. And the steep interest rate attached to the said loan.
How you can pay will depend on the lender in question, but options typically include debit card payments, an automatic payment from your bank account, cash payment, or a post-dated check.
If you can, you want to pay off your loan as soon as humanly possible. Otherwise, you’re staring down the barrel of insane interest rates and fees.
What You’ll Owe and When You’ll Owe
What will you owe when the pay date rolls around?
For starters, you’ll owe what you borrowed from the lender. But you’ll also owe the interest rate and the various fees (yes, there will be many fees) that were attached to it, so make sure to do that math before it’s time to make a payment.
As a rule, you’ll owe the lender their payment on your next payday, whatever your pay cycle is. That could be monthly, bi-monthly, weekly, etc.
So don’t be surprised if that due date pops up sooner than you were hoping.
So now you’re in a mighty ugly situation. You can’t repay your loans on the due date.
Buckle your seatbelt and put on your big kid pants. This will get interesting.
In some states (but not all) you can refinance your loan for another term. This will let you pay only your fees on the due date and delay paying the initial amount until the next term rolls around.
But keep in mind that terms for payday cash loans are based on your payday cycle. So if you get paid weekly, or bi-monthly, your loan payment will only get delayed until your next paycheck.
Oh, and those fees that bit you last time? There’s even more of them attached to the new term. Mentally prepare yourself for that fun fact.
Get Payday Cash Loans Today
If you’re in an emergency situation, and you need money to dig yourself out of a hole, you might need to consider a payday loan.
That’s where we come in.