If you ever find yourself in situations of financial needs albeit temporarily, you don’t have to worry anymore. If you think that getting huge personal loans might cause you years to repayment, then payday loans are just the thing for you.
These are short-term loans generally 2 or more weeks long and the loan amounts are a few hundred bucks. The purpose of these loans is to get you out of temporary financial problems. See this article to find out more about what payday loans are and how they work.
What are Payday Loans?
Payday loans are small personal loans which you take to fulfill your needs. As shown from their name, these loans are repaid on your very next payday after you take out the loan. To get the loan, you write a check to your lender of the amount you want to borrow along with the finance charges.
These charges are not fixed and vary from lender to lender. At your next payday, they deposit the check to the bank in which you have an account and draw the money on the due date. You can also authorize the lenders to electronically draw money.
However, these loans are not always small and you can ask for bigger loans as well. You can also apply to repay them in installments. Otherwise, smaller loans are to be paid in one lump sum. Still, there are rare events that these loans actually become beneficial.
Loan Renewal in Payday Loans:
If you think that you are unable to repay them until your next payday, you can get a loan renewal called ‘Rollover’ in payday loan terms.
In rollovers, you can request to repay the loan later; however, the finance charges will continue to accrue. The number of times you can get a rollover is controlled by the state. Some states even outlaw them.
Costs and Rates of Payday Loans:
The finance charges vary from state to state, some states have maximum limits for them too. These vary from $15 to $30 for $100 which is a big amount.
Their APR rates are in hundreds which is very high and can cost you more than some personal loans especially if you get a rollover. APR is typically 400% and finance charges are $15 to $30 to borrow $100.
Two-week loans result in interest charges from 390 to 780%. Rates can be even higher in states that do not regulate the loans and have no maximum limits, shorter loans have higher rates. Still, they have never crossed 1000% APR yet.
Consumer Financial Protection Bureau (CFPB) reported that 80% of the borrowers apply for rollovers. Also, one in five borrowers defaults on these loans because the loan fee keeps on incurring.
Payday Loan Requirements:
These short-term loans do not have a long list of requirements. All you need is to have:
- Identity proof
- A bank account that is functional and active
- A steady source of income
Loan servicers do not run a credit check, neither do they see if you’ll be able to repay the loan or not. All they do is take advantage of your situation and the deals seem too good to leave. This traps you into paying hundreds of percent of APR.
Payday Loans Online:
With online lenders, the entire process is completed online, so you can expect to apply, receive a decision and get funded, if approved, all online. Just follow these simple steps to apply:
- Fill the application form of the platforms that you want to borrow from which takes only a few minutes.
- Enter your name, bank account information, and income. Your credit score or history is not required.
- Enter the amount you want to borrow.
- When you finish, click apply.
- You may need to fax or email your lender some additional supporting information.
- Funds will be transferred within 24 hours of applying if your application gets approved.
Should You Get Payday Loans?
Payday loans might not be a safe option because of their extremely high APRs. Instead of being helpful, they end up causing more loss than gain.
However, if you only take them once or twice in life and pay them off early, then they may help you in emergency situations. But 80% of the people get renewals which keeps the payday industry running.
Also, in many instances, when using online payday loan services, they share your account information while looking for lenders which can raise the risks of scamming. They can also share your personal contact information which means you’ll be getting spam calls and emails for a very long time which does not something to look forward to.
Alternatives to Payday Loans:
Instead of getting these loans, you can use other alternatives such as:
- Reserve some money for times of emergency. This sounds tough but is very helpful.
- Build a good credit score to get good loan offers from traditional personal loan lenders.
- Start a part-time job for times of emergency.
- Consider borrowing some money from friends or family if you can.
- In case you do need to borrow payday loans, only borrow the amount you can repay with your next pay.
- Always keep in mind to only borrow the money which will make you able to save some for personal use from your pay after repaying the loan.
Some Best Payday Loans Online:
There are some payday loan service providers which are trustworthy. They do not have shady deals and also protect your personal information. Among these, some which have good reviews from the users are:
- CashNetUSA: Provides loans within one business day, gives detailed information on all the rates.
- Speedy Cash: An International company known for providing small loans.
- Check into Cash: A pioneer of payday loan servicing, they provide the customer with quick solutions to their financial needs.
- LoanMart: Provide services in 11 states, offer convenient features like an in-house DMV so consumers can get their cash fast and without any hassles.
- LendUp: Does not have rollovers, thus, no debt traps. It helps you to find a solution in case you can’t repay your loan.