Have you found yourself facing an unexpected bill that you’re unsure how to pay? If so, you might find relief from a payday loan.
This is one of a small number of loan options where lenders won’t require you to have stellar credit or use collateral. Plus, the due date for repayment is typically set up on the day of your next paycheck for convenience.
We’ve laid out an all-inclusive guide to show you exactly how to get a payday loan and what it takes to qualify. Read along to find out how it all works.
What is a Payday Loan?
Payday loans are usually short-term loans that are due with interest on your next payday. Many times, the amount will be deducted from your paycheck automatically.
Although the specifications of these loans vary based on the lender, most of them are $500 or less. Payday loans are very similar to cash advances from your employer or credit card company.
Why Would You Need a Payday Loan?
Most people don’t have a substantial amount of money in their savings account. In fact, close to one-third of British workers are living paycheck to paycheck.
So, what happens when the majority has an emergency? They borrow money.
If you’re living paycheck to paycheck and suddenly have car trouble or need repairs done in your home, a payday loan can help dig you out of a financial hole.
People also turn to payday loans when they have poor or nonexisting credit. Because in many cases, low credit scores and low-income fall hand in hand.
If you’ve recently endured an unexpected financial hardship, securing a payday loan can eliminate a large part of your stress. We’ll show you exactly how payday loans work and what you need to do to obtain one.
How to Get a Payday Loan
Applying for a payday loan doesn’t require much paperwork. You have to be at least 18 years old with a valid picture ID, an open checking account, and a reliable source of income.
You will also need to provide the lender with your contact information, usually a phone number and address. You can find lenders and apply online or at a brick and mortar location.
How Payday Loans Work
Payday loans are very similar to unsecured loans. They don’t require you to put up property or other assets as collateral.
It’s also fairly quick to get access to the cash. These loans are usually deposited into your checking account within a day or two.
There is, however, a little paperwork involved. After you’ve negotiated your payday loan, you’ll have to sign a contract that solidifies your agreement with the lender. This makes everything legal.
The contract will include details regarding the length and amount of the loan and the responsibilities of both parties for the duration of the transaction. It will also include your interest rate.
Though we’ve listed the many great points to using payday loans, there are a few disadvantages you should be aware of.
Most lenders won’t approve your loan if you aren’t a permanent employee with a fixed salary. This means that if you are a self-employed freelancer or business owner, the uncertainty of your income may prevent you from being approved.
Additionally, people who don’t work a set amount of hours tend to face rejection if their paychecks fluctuate.
If you fall into either category, most payday loan lenders won’t offer you the option of having a cosigner to make up for the problems with income. You may qualify for another type of loan though.
Speak to your lender about your options even if you don’t meet the terms for their payday loans. It’s possible they will have something else to help you.
Do You Qualify?
With most of the loans offered by banks and credit unions, you will be denied instantly if your credit history is less than perfect.
Payday loans are personal loans that are usually only based on your income. A lender won’t approve you for an amount higher than what you make.
These typically don’t require an invasive credit check, long meetings with your bank, or a ton of paperwork and references.
Most payday loan applications are completed in less than 20 minutes. And many lenders allow you to apply online from your own computer from home.
Payday Loan Repayment Options
Your lender might have a preferred repayment method. So, be sure to find out their specifications during the application process.
Your options can include post-dated checks, bank transfers, and cash. On your due date, you will owe the principal balance (original amount you borrowed), interest, and any other fees that were agreed upon.
If something comes up and you’re unable to pay in full by your due date, you could have other options depending on your lender and where you live.
Some states have restrictions set in place for refinancing payday loans. While others will allow you to do so.
Refinancing typically means you’ll have to interest and/or late fees on your original due date. Then, your principal balance will roll over into a new term. On your new due date, you will have to pay the principal balance with other fees.
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