Payday lending in the United States is a $30-billion industry.
With 12 million borrowers taking out these loans every year, it’s easy to see how it became a multi-billion-dollar sector.
The fact that processing the loans can take as little as 24 hours, coupled with the need for very minimal requirements (most lenders only require a checking or savings account) has made it more popular.
But what if you only have prepaid debit? Can you still get a payday loan with a prepaid debit card?
Yes. Much like how you can secure a personal loan with bad credit, getting one with just a prepaid debit card is totally doable.
But you need to know more about these loans first, what their requirements are, and where you should get them.
Don’t worry. In this post, we’ll explain all the important details you need to know about these loans.
A Short Background on Payday Loans (for People with Only Prepaid Debit Cards)
If you look into recent studies, you’ll learn that 71% of card users reported having one debit card. As opposed to the 39% who said they have one credit card.
As you can already guess, the huge economic impact of the Recession gave rise to the popularity of debit cards. With more people wanting to keep their debts at a minimum, it made sense to switch over to debit accounts.
It’s this popularity that also gave rise to prepaid card loans.
Since more than two-thirds of the card-using population prefer debit (including prepaid debit) over credit, the payday lending sector saw this as an opportunity. Which is why they started offering their financial services even to borrowers who don’t have traditional bank accounts.
Because if they didn’t, that means ignoring the above-mentioned 71% of potential customers!
A Quick Credit vs. Debit Card Comparison
Here are a few more statistics to further ease your worries of a potential rejection (for having just a prepaid debit card):
In the last quarter of 2016, the total number of credit cards in the U.S. was 453.07 million. In March 2015, there were 471 million debit cards under Visa. This doesn’t include the other 183 million under Mastercard in June 2015.
This shows that consumers put greater preference on debit accounts. Aside from assuring you that you’re not alone, this should also tell you that it’s possible to get a loan even without a credit, checking, or savings account.
This doesn’t mean that all lending institutions already offer their services to borrowers who only use such cards. You still need to do your research to find lenders who can provide you with say, an instant loan.
What’s important is to know that they do exist. That they’re ready to help borrowers in a financial pinch.
You just need to spend some time in looking them up. From there, compare as many offers as possible. This way, you can ensure you find the one with the best interest rate.
Before Starting Your Search: Understand What Payday Loans Are
Before you begin looking for a payday loan for people who only use prepaid debit, you should first have a grasp of payday loan basics.
Here’s what you need to know about these financial services:
What They Are
Payday loans, also known as cash advance loans, fast cash loans, and instant loans among many others, are basically short-term loans. As the name already suggests, most of them need repayment by the time you get your next salary in. The terms still vary, but many of them need repayment in as little as two weeks.
They provide qualified borrowers immediate access to cash – in as little as 24 hours, or the next business day.
Who Can Apply for Them?
Almost anyone facing a financial pinch can apply for a payday loan. So long as they’ve a stable means of income, they meet the minimum age requirement, and that they have a financial account.
Traditionally, this meant a checking account, a savings account, or a debit account. Nowadays, with more people only using a prepaid debit card, payday loan lenders have extended their services to this group of people.
How Much Can You Apply For?
This depends on several factors, including your exact location and how much you make a year. In many cases though, the loan amount can range from $100 up to $1,000. Some may offer higher, but be sure to check for your state’s legal maximum limits.
Why Should You Apply for Them?
Emergencies can happen to anyone, at any given time. Unfortunately, most of these incidents result in unexpected expenditures. Expenses that you may not have enough money or savings for.
Perhaps someone in the family fell ill and he/she had to go to the hospital. Aside from medical and hospital fees, there are also the after-medications. On average though, an emergency room visit can rack up to $1,233.
Or maybe a storm passed and your roof sustained serious damage. Rather than suffer from even more consequences of a leaky roof (think water damage or mold development), you want to have it repaired ASAP. This means paying an average of about $772 in repairs.
In this case, know that payday loans can help provide you with the funding you need for such emergencies.
Whichever the case, know that a payday loan can help you get through short-term financial hardships. Just make sure you limit their use to short-term expenses.
The Pros Over Traditional Loans?
If you’ve ever tried applying for a loan with a bank or a credit union, you know how long it takes. Traditional lenders require a lot of documents, such as proof of identity, proof of income, and banking statement to name a few.
All in all, it took weeks, even a month or so to find out how your application went.
Worse, after spending a lot of time constantly worrying about the application, you got bad news. You didn’t make the cut, and the lender won’t issue you with a loan.
Payday loans, so long as you choose the right lender, give you much higher chances of loan approval. You’ll also get news about the status of your application in as little as a day. And of course, the minimal requirements you need to submit make these loans often a better choice.
Best of all, because these loans specifically cater to people who can’t get access to traditional loans, you have higher chances of qualifying and receiving approval. Even when you have no credit card accounts. Even if you have bad credit.
Compared with the interest rate that most traditional lending institutions charge, payday lenders charge higher. There’s also the much shorter term. In many cases, this means you only have a few weeks or up to a month to repay the entire loan.
It’s for this reason you should pay careful attention to loan terms before signing. Make sure you understand the terms and agreements. That you won’t have issues repaying the loan once it’s due.
Also, apply for and use payday loans only when necessary. Yes, you can use the loan money for almost anything. But, it doesn’t mean you should already use them for every household or personal expenditure.
In a nutshell, the primary downside to payday loans is you need to approach it with more attention and care than a traditional loan. You don’t want to keep making higher payments, which can accumulate the longer you extend your payment terms.
Finding a Payday Loan with a Prepaid Debit Card: How and Where to Start?
What you need to look more carefully for is a lender offering the best deals – in terms of rates, loan amounts, and payment flexibility.
You’ll find payday loan lenders in the form of physical brick and mortar payday loan shops to check cashing centers to even pawn shops. You’ll even find some offering loan applications entirely through the World Wide Web.
The thing is, not all these businesses have the proper licensure, bond, and insurance. Its important you check for these requirements before signing the dotted line. Especially with federal protective laws for consumers now in place.
For instance, the Department of Defense now regulates payday loan lending institutions. If you are a Service member or a family of one, make sure that the lender won’t charge you more than a 36% yearly interest.
Just Before You Sign that Dotted Line
After completing all the requirements, the payday loan lender will verify the information you’ve provided. As most payday lenders don’t do a credit check, they’ll let you know right away if you qualify. So long as you gave the correct details and submitted all requirements, you most likely will get good news about your payday loan with a prepaid debit card application.
But before you accept the money – which in this case, you’ll receive through your prepaid debit card – make sure you read everything in the contract first. It should contain and explain all terms and conditions of the loan, including interest rates, financial charges, late fees, and other possible penalties.
If there’s anything you don’t understand, don’t hesitate to ask. Rather than be shocked when the bill comes in, you want to know what exactly you’re getting yourself into.
Remember, any kind of contract legally binds you, so feel free to ask the lender. A reputable and trustworthy payday lending institution will answer all your inquiries honestly.
Need more information on how payday loans work? We’ve got more tips and tricks to share with you! Check our blogsite out for more articles like this.