Unplanned medical expenses, groceries, car and home repairs… Those are a few of the reasons why 12 million people across America turn to payday loans.
While often besmirched by financial gurus, for people who are stuck between a rock and a hard place, payday loans offer a necessary reprieve. They help people build bridges over today’s hardships to a brighter tomorrow.
If you’re facing down a difficult financial situation, you may have considered instant payday loans in the past but find yourself with a lot of questions.
What are payday loans? How do I get them? What do they cost?
To help you understand more fully all of the implications surrounding payday loans, our team has put together this article. Our hope is that the guidance offered in it will help you make informed decisions in regard to if an instant payday loan is right for you.
What is a Payday Loan?
Payday loans are products offered by lenders typically in the amount of your typical paycheck.
They are taken out by people who have immediate expenses that can’t wait until their payday. After taking out a payday loan, borrowers can address expenses immediately and then pay back their loan when their paycheck comes in plus any fees.
This process of paying back your loan with your paycheck is made easy with most payday loan lenders. At the time of borrowing money, your lender will typically ask that you pre-write them a check or give them access to your bank account. Then, on your payday, your lender will simply cash your check or debit your account what’s owed.
This process contrasts similar short-term loans one might get from a bank which may offer more flexible, longer-term pay schedules.
What Are Payday Loans Used For?
Borrowers take out payday loans for a wide variety of reasons. Below are some common examples where payday loans might be useful to you:
- Car repairs
- Home repairs
- Medical expenses
- To cover a loan to a friend or family member
- To may down other debt
- To avoid borrowing from friends or family members
- Because they don’t qualify for more favorable short-term loans
The above list is by no means comprehensive. It should give you an idea of why an instant payday loan might be an appropriate option, however.
How Are Payday Loans Paid to Borrowers?
The way in which you receive your payday loan funds will vary based on your lender and personal preference. Today, industry standards for loan payouts come in one of two ways: cash and direct deposit.
With cash, you can walk into your instant payday loan provider and they can give you your loan directly from their register. Direct deposit may not be as instantaneous as cash as it’s subject to regular bank processing times. Still, if you’re worried about walking out of a lender with a large sum of money on hand, you’ll probably want to opt for direct deposit.
How Do You Qualify for Payday Loans?
The ease in which borrowers qualify for instant payday loans is one of the primary advantages to taking them out. With traditional bank-issued short-term loans, most borrowers will need to have excellent credit or at least significant collateral to secure their loan product.
Given that instant payday loans are for smaller amounts of money, getting your money is much more simple.
First off, payday loans will not require a credit check. All you’ll need from most lenders is your ID, proof of residency, and verifiable income. Verifiable income is necessary because lenders want to make sure that you have a pending paycheck coming in that can cover your loan amount.
Beyond those requirements, you’ll need to be over 18 years of age to take on a loan product.
Where Can You Get Payday Loans?
Payday loans are widely accessible via local lenders often branded as payday loan services. You can also find products similar to payday loans via online lender matching services or at your local bank.
A simple Google search of “payday loan providers” will turn up both local lenders and online lenders you can filter through and choose from.
How Much Do Payday Loans Cost?
Payday loan costs vary from lender to lender. Because of that, it’s important that you fully understand all fees associated with your instant payday loan prior to taking it out.
Typically, payday loans don’t charge “interest”. Instead, they brand their charges as “fees” quantified in X amount of dollars per $100.00 borrowed. So, if your payday loan service charged $15.00 per $100.00 and you took out a $500.00 loan, you’d be liable to pay back $575.00.
Shop around for multiple instant payday loan lenders to ensure you’re getting the best terms possible with your loan product.
What Happens If You Don’t Pay Back Your Payday Loan?
If you don’t pay back your loan on time you’ll find that your amount owed will grow. If you completely give up on paying back your loan, the consequences can be even greater.
You can cause substantial damage to your credit. You can have your wages garnished. Your debt may even be sold to collectors who may harass you until you settle.
To avoid these issues, it’s very important that you take out payday loans understanding your payment obligations and knowing that you’ll be able to meet them.
Wrapping up Everything You Need to Know about Instant Payday Loans
Payday loans can be a costly rabbit hole to go down as far as money borrowing goes. Still, if you’re without other options and need money now, leveraging instant payday loans responsibly can be more beneficial than being without the money you need.
Understand the guidance above before taking out a payday loan. Also, talk to your financially savvy family member and friends to make sure you know all implications around instant payday loan products.
The more you know, the less likely your chances will be of falling into a trap and hurting your financial health.
If you’re in need of money quickly, our team at Bonsai Finance may be able to help. Bonsai Finance not only educates consumers on finances but helps them find viable borrowing options via loans and credit cards from multiple lenders.