The rent is almost due, you have utilities to pay, and you can barely even afford food. While you’ve got money coming to you shortly, your payday is still a few days away. To put it simply, you’re in some serious hot water.
So now, for the first time, you’re considering taking out a payday loan. The only problem is: you’re clueless about such loans. “Can I get a payday loan before my payday?” you ask.
We’re going to answer that question, as well as a number of other payday loan-related questions below. Let’s begin!
What are Payday Loans?
Sometimes referred to as a cash advance, a payday loan is a small amount of money that a person can borrow until he or she receives wages on his or her payday. Meant to cover small, short-term expenses such as food, utilities, and rent, these loans are a viable option in the event that a person’s bank account is running dry.
The amount of payday loan a person can receive is generally smaller than the amount of his or her payday paycheck. In most cases, payday loans are expected to be paid off within a period of two weeks, unlike installment loans which may be payed off over months or years.
How Do You Apply for a Payday Loan?
The who point of a payday loan is to cover for money that is to be received in two weeks or less. As such, payday loan applications are very quick and easy to fill out.
All you need to do is find a lender, fill out an application with your accurate information, submit it, wait for a decision on the terms of your loan, sign off on the loan, and receive your money. The process generally takes no longer than a day to be completed.
What Requirements Must You Meet to Get a Payday Loan?
To secure a payday loan, you will have to meet a few different requirements. In most cases, you will need to supply proof that you meet these requirements.
First and foremost, you need to be at least 18 years of age. To prove that you’re 18, you will need to show your driver’s license or state ID.
Next, you need to supply proof of income. This is usually done through a paystub or bank statement. The greater your income, the larger the loan you’ll be allowed to receive.
It’s also necessary to have a valid, open checking account, as your loan money will be deposited into it. You’ll need to supply proof of this as well, which will usually be your account and routing number.
Lastly, you need to have an active phone number. This is necessary so that your lender can communicate with you before, during, and after the loan process.
In What Form Will I Receive My Payday Loan?
After you’ve signed for your loan, you will have a few different options as to how you’ll receive your money.
One option is to use a prepaid debit card provided by your lender. To obtain such a card, you’ll have to apply for the loan in person.
Another option is to simply receive cash. Again, you’ll have to obtain this cash in person. We recommend foregoing this option, as cash can easily be lost.
The third option is to have money deposited straight to your checking account. This can be done remotely, allowing you to secure the loan from the comfort of your home.
Do I Have to Pay My Loan Off By My Payday?
In most cases, you’re not expected to pay your loan off on your payday. Instead, you’re given a term of between 2 and 4 weeks. If your loan is not paid off by the end of the term, your lender might alert creditors, driving your credit score down substantially.
Note, the exact length of your loan term depends on your lender as well as when you receive your paycheck. It’s impossible to know the due date of your payoff without applying first.
What are the Interest Rates on Payday Loans?
Payday loans have notoriously high interest rates. Generally, they fall between 300% and 400% APR (Annual Percentage Rate). This comes out to between $10 and $30 every two weeks for every $100 taken out. So, if you borrow $500, and it takes you two weeks to pay it off, you could have to owe anywhere from $50 to $150 extra by the end of the term.
For reference, credit cards average between 15% and 20% APR, substantially less than what is charged on payday loans. For this reason, if you can, you should use your credit card instead of taking out a loan.
Are There Other Fees Associated With Payday Loans?
While interest fees are the primary fees you’ll have to worry about when taking out a payday loan, they are not the only fees you’ll have to worry about. In some cases, you’ll also need to pay opening fees. Debit card fees could potentially be charged as well.
Will a Payday Loan Affect My Credit?
One of the good things is that, if you pay them, your payday loans will not be reported to credit bureaus. Experian, Equifax, and Trans Union (the three major credit bureaus) will have no knowledge of you opening such a loan.
However, if you’re unable to pay your loans off by your due date, you should expect your lender to report that fact to said credit bureaus. Should credit bureaus find out that you were unable to pay off your loans, your credit score will take a seismic dive.
Getter Better Acquainted With Loans
If you find yourself nervously mumbling, “my payday is too far away,” a payday loan is a viable option. Be sure not to become reliant on payday loans, however, as you’ll be drowning in interest before you even know it’s happening.
Hoping to become better acquainted with other types of loans? You’re in the right place. Bonsaii Finance has all the information you need.
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