About 12 million people take out payday loans for a number of different reasons. Some people use them to pay basic expenses, like rent and utility bills. Others use them for an emergency, such as a car repair.
A payday loan seems like an easy way to get money because you can walk into a retail location or fill out an online application and get cash. That’s not the case because there are requirements that you have to meet to get your loan approved.
Would you like to know what the payday loan requirements are?
Read on to find out more about taking out a payday loan.
How to Find Payday Loans
You need to find a payday lender before you can apply. There are things that you need to know about the payday loan industry. Like a lot of other industries, there are good companies and then there are scams.
You need to start by finding legit payday loan companies. It will take a little bit of research, but it’s time well spent to avoid getting ripped off.
What are the Payday Loan Requirements?
When you find a lender, your next step is to find out what the payday lender’s requirements are. The requirements of a payday loan will depend on where you live and the lender.
There are basic payday loan requirements that are standard across the board. These requirements were put in place by the Consumer Financial Protection Bureau. The agency found that too many lenders were approving loans that they should not have.
That left borrowers with other challenges, like being deeper in debt.
Here’s what you need to know about the minimum requirements.
You have to be at least 18 years old to take out a payday loan. In other words, you can’t send your kid to the payday lender and have them take out a loan for you.
Proof of Income
This is going to be the most important part of getting a payday loan. If you have no proof of income, the lender won’t believe that you’ll be able to pay the loan back.
What qualifies as proof of income will vary from lender to lender. Some payday lenders only accept pay stubs from your place of employment. Other lenders will accept income from other sources, such as unemployment or welfare payments.
Lenders want to see steady and predictable income. If you get paid in cash or if you’re self-employed, you’re unlikely to get approved for a payday loan. You have no way to prove your weekly or monthly income.
Lenders also say away from self-employed borrowers because their incomes are unpredictable. One great month can be followed by a month of little to no business, making it difficult to make loan payments.
This is a standard requirement for payday lenders. It may seem strange to need a bank account. Lenders require this for two reasons.
The first is to give them another way to prove income. The second reason is to make it easier to get paid. They can set up automatic payments right from your bank account.
Lenders will also look at your bank account to make sure that you can pay the loan back. For example, if they see that your account is overdrawn, they may deny your loan.
Proof of ID
Not only do you need to prove your income, but you also need to prove who you are. This is to prevent fraud and ID theft. Usually, a government-issued ID like a driver’s license or a passport.
Social Security Number
If you’re applying online for a payday loan, you’re likely to have to provide your social security number. Some lenders will also ask for your social security number when you apply in person.
Other Payday Loan Requirements
Those are the basic requirements to get a payday loan. Some lenders have additional requirements that you need to be aware of.
Your Application is Accurate
You don’t want to exaggerate your income or any other information on your application. In case you can’t already tell, lenders have ways to verify your income. They’ll look at your paystubs and your bank account.
They will deny your loan if they find any discrepancies between your application and your supporting documents.
Past Credit History
Some lenders will do a credit check before they approve your payday loan application. Other lenders offer no credit check payday loans, where this isn’t a requirement.
If you do go with a lender that requires a credit check, you need to have good credit scores to get approved.
There are a number of other signs that payday lenders will look for to determine your ability to pay back your loan. They’ll look at how much credit you use compared to how much you have available. This is called your credit utilization rate.
A high credit utilization rate is a sign that you’ve maxed out your credit cards and other financial options before turning to a payday loan. A payday lender can look at that and decide not to approve your loan because it’s too risky.
Another signal is whether or not you recently declared bankruptcy. Bankruptcy is a way to get relief from your debts and get a fresh start. That being said, applying for a payday loan right after bankruptcy can mean that you’re still in financial trouble.
Get A Payday Loan Approved
Payday loans can be a useful financial tool to cover unexpected expenses or to make ends meet. It’s an easy way to get money quickly, but there are requirements that you have to meet.
Payday lenders want to make sure that you meet the payday loan requirements before they approve your application. These requirements are meant to protect lenders from losing money.
They also exist to prevent you from taking out a loan that you can’t afford, leaving you deeper in debt.
Do you want to know more about payday loans? Be sure to read this article about payday loans to understand everything you need to know before applying.