What’s a payday loan?
A payday loan is actually a kind of short-term personal loan for borrowers who cannot get a traditional personal loan due mostly to having bad credit. If you are not eligible for a standard loan because of low credit score or history of slow payments or nonpayment of previous loans. A payday loan MAYBE the answer to your financial problems.
We say MAYBE because finding the wrong payday loan can cause you to fall into even deeper financial problems. Finding the best payday loan for your situation is the first step in the process.
Looking for a cash advance or fast cash loans
Payday loans are also known as cash advance loans or a fast loan since it doesn’t take long for the process to complete. Usually, it only takes a few minutes to fill out an online application and approval is sometimes instantaneous.
That’s because MOST of these companies are NOT using a credit scoring system. Payday loans, like the name suggest, are based on your paycheck.
Even funding doesn’t take a lot of time. Sometimes you can have the loan in your bank account within 4 hours of applying!
Requirements for payday loans
The requirements to get approved are also simple compared with regular loans.
Most lenders require applicants to be:
- of legal age
- a legal resident
- must be able to present proof of income
- and must have an active bank account
Despite the quick and convenient application process, consumers must carefully weigh the pros and cons before acquiring payday loans.
Finding the best payday loans – and what to avoid!
It is no secret that cash advance loans are accompanied by steep interest rates. Rates can range anywhere from 100% to as much as 300%.
Bad credit payday loans are payable within 30 days so you must be able to submit full payment by the next paycheck. Failing to pay back your loan on time will cause you to pay additional rates and fees, and the penalty fees for paying a payday loan back are no joke! You can easily end up paying back 3 or even 4 times the amount you originally borrowed!
What to search for when reading the fine print on a payday loan!
- When is the payment due? There are some hybrid payday loan programs that will allow up to 60 days for repayment. BUT some of them have a “nominal” fee if you don’t pay back in 30 days. Yes, you can pay it back in 60 days but there may be an additional $50- $100 fee for doing so.
- Payday loan “roll over” – Payday loans are extremely convenient. Esp if you can’t get a traditional loan. But there is a major downside to them. They are expensive. Many people can’t repay them when they are due. So they opt to “roll over” the payment for another 2 weeks. This “rollover” is where people get into trouble. The loan compounds so much that some of them are never able to repay it. Becuase so many people fell into massive debt due to this, a new industry was born. Payday loan consolidation companies. Also, many states enacted laws to stop payday loan companies from basically bankrupting their clients. But many CONSUMERS found ways around these laws so that they could continue to get the financing they need.
- Overdrawn checking accounts – As part of the payday loan process, the payday loan companies obtain access to your checking account. This is how they deposit the loan and take back their repayment. But let’s say you didn’t send in your request for the loan to be extended? Your payment will be taken out of your account on the day its due. Which can cause your account to become overdrawn, or checks you have written to bounce.
- NSF Checks – Some payday loan companies have you write a postdated check as the way they will collect their payment. But if you have no many in the bank when they deposit it, you will get charged NSF fees from the bank and from the payday loan company. Each state deals with NSF checks differently. Here is a site that list the penalties by state. Payday loan companies are EXPERTS at collecting debts. You need to know if your state allows them to sue you for this bad check and for how much they can go after you for.
Finally, you really want to read the fine print. You need to know exactly how much you will be paying back and the penalties and fee associated with the loan.
Payday loans have HELPED a lot of people to get financing when it was needed the most, and given to a segment of society that the banks no longer deem “fundable”. But you have to be careful.
Before signing up for a payday loan, shop around first to find a lender that offers the most reasonable deal. Don’t forget to check the lending company’s reputation. Avoid illegal lending companies as they are bound to violate lending laws to earn more profit. Read the fine print and make sure that you are clear about the lender’s terms and conditions. Last but not least, see to it that you will be able to pay back your loan on time.