Unexpected financial emergencies are often stressful but don’t need to ruin your week. The quick and easy funding available through instant payday loans can help you solve your financial crisis in a matter of minutes. Payday loans are a good option for people with poor credit and those who don’t want traditional bank loans. Read on to learn more about how payday loans work and the quick processing if they are right for you.
What are Payday Loans and How Do They Work?
Payday loans can be small, high-interest loans with low principal that must be repaid in just a few weeks. These loans are for people who have a need for quick, easy cash to help them “until payday”. Payday lenders allow you to quickly get approved and receive your funds. However, they usually charge high interest rates because of the lower credit score.
How do Payday Loans Work?
Once approved for a loan, your lender will request that you complete some basic paperwork. These can often be completed online from your home. Also, your bank information will need to be shared in order to receive your money.
While loan terms and amounts can vary depending on lender, payday lenders generally expect you to repay the entire amount plus interest within 2-4 week. A $300 loan might result in a draft being drawn from your checking to pay $340. For larger loan amounts, your loan officer may arrange automatic payments every other week until the loan is paid off. Sometimes, your lender may allow you to mail in your payments. But, this is an exception and not the norm.
Payday loans require fees
Payday loans can come with a variety of fees. These fees are added on to the principal loan amount. If your lender requires background checks, expect to pay a small application fees. Many lenders will also charge origination charges, which can either be a flat rate or a percentage depending on the amount of your loan to cover administrative costs.
Some fees are not avoidable by lenders and may only apply in certain cases. A late fee may apply if you default on a loan payment. If you fail to pay the loan on time, some lenders will charge you pre-payment fees. Other lenders might charge renewal fees or renew fees if you choose to renew your loan, or take it out again at a later date. These fees are an additional cost to borrowing money. You should avoid them whenever possible.
These are the steps you need to take before you apply for a Payday Loan
Payday loans are popular for their ease of access and fast funding. Payday loans are often viewed with suspicion due to their easy access. This is especially true if the borrowers don’t do adequate research. You should do the following before you apply for this type of loan:
- The right type of loan is important – Instant payday loans are one type of financial product. However some companies offer products called “payday Loans” that don’t fit the definition. One example is that some companies might require you to pledge collateral to help secure the loan. This can put your personal assets at risk. Before you apply, be sure to read the fine print.
- Be open to other options. Payday Loans are not the best option for every borrower. A second job, credit cards, borrowing from a friend, family member, or getting short-term cash may be options for you if you are in financial trouble.
- You should review the requirements of the lender. Lenders have different requirements. They require proof that you are earning income, can show credit scores, can loan amounts and agree to repayment terms. Before you submit an application to a lender, ensure that its requirements are compatible with your loan needs.
- Understand your state laws – Each state’s Attorney General has the authority to place limitations and regulations on payday lending or outlaw it entirely. These laws aim to protect low-income families from predatory lending practices. Payday lenders must adhere to them. Make sure you are familiar with these laws, and that your lender adheres to any applicable state statutes.
Basic requirements for getting an online loan
In-state regulations regulate instant payday loans. This means that lenders must comply with the guidelines set forth by their respective states. Lender requirements and state laws will differ from one state or another for payday loans. For a loan to be granted, lenders need to know the following:
- Age – To be legally bound to a payday loan contract the borrower must not be under 18 years.
- An active checking account (Credit Scope) – Most payday lenders won’t issue checks or cash to you for the initial loan proceeds. They will instead direct deposit your funds into your checking account. Many lenders will also require that you auto draft your loan repayments from the same account.
- Proof of income – While income requirements may differ by area, lenders are looking for documents to show that you can repay your loan when due. It doesn’t have be income from a traditional occupation, but it must be consistent and recurring.
- A phone number and email are essential if your lender is to contact your account. You will need to provide a reliable address, phone number and email address. Many lenders will also request contact information to provide references.
Reasons for rejection
While payday loans have less requirements than traditional loans, lenders may still deny loans if they consider the risk to default too high. You may get declined for a loan application because of:
- You aren’t employed or have a low income – Lenders could deny your application if you don’t earn enough to pay for your basic living expenses.
- You are either a current holder of a payday loans or have borrowed one. Although each state has its own limitations, the majority limit borrowers to one outstanding payday loan. In states where payday loans are permitted, borrowers can borrow between $500 and $1,000 at a time.
- There are too many outstanding debts. Lenders won’t be focusing on your credit scores. They will instead look at your ability to pay your debts. Lenders may not approve of you taking on too many current debts and too low income.
How to apply online for a payday loan
When you have determined that an instant payday loans is the best way to solve your financial problems, it is possible to apply immediately and receive funds the next day. Follow these steps to obtain a payday advance:
- The Loan Application Form can be filled out – Most reputable payday lenders will offer a quick loan application online. You will need to provide income documentation and other identifying information in order to complete the application as smoothly as possible.
- Compare offers and receive them – There is a wide range of payday lenders. Even if you get approved, you don’t have any obligation to accept a loan. Payday Champion may offer you multiple offers from different banks when you shop for a loan match service. You can compare these offers by comparing interest rates, loan amounts, repayment terms, and then choose the one that best suits your needs.
- Sign the Agreement. Once you have found the best offer, submit all documentation and bank information. Finally, sign the loan agreement. You can usually do this online without having to go into an office.
- Get Your Money – Most lenders will direct transfer your funds to your bank account in less than 24 hours. Ask your lender about an estimated timeframe as part of your application. Some lenders will deposit the funds within one day, while others may take between two and three business days depending upon their policies.
Payday loans: The pros and cons
Payday loans are an option that can be used to help meet short-term financial obligations. However, it is worth considering the pros and disadvantages of payday loans before you decide on this type of financing.
- Simple application process. Traditional bank loan applications can take up to a few days or even weeks to complete. You will need all the documents and documentation. Most payday loan applications can be completed within an hour. Many lenders also offer convenient online applications.
- Fast funding – You’ll typically receive your funds within 1-2 days of approval.
- Low or no credit check requirements. Many lenders won’t run credit. Lenders who do will often run a “soft” pull that doesn’t affect your credit. A person with poor credit can still qualify, provided they have not had to file for bankruptcy recently or defaulted on a payday loans with another company.
- High interest rates: With interest rates reaching the triple-digits, your loan may accumulate a lot over a short period of time. Payday loans should not be renewed to pay regular bills. You must ensure that the loan can be repaid on time.
- Payday loans have short repayment terms. Unlike home or auto loans that can be repaid over many years, payday loans are repayable in just a few weeks. This is to reduce interest rates and minimize fees.