Whether you’ve suddenly experienced an unexpected expense, discovered your account is overdrawn or just need some extra cash quickly, payday loans can be the perfect solution. Despite the ease in getting a payday loan, it’s important to realize that they are intended to help you out of unexpected situations not as a long-term goal for consistent financial problems.
If you’re considering a payday loan, it’s beneficial that you understand exactly how they work and how they may impact your future financial situations. Below is some general information on how payday loans work. Keep in mind that payday loans are regulated by both state and federal laws. Because the laws may vary from state to state, some of the information may not apply to you or your particular state.
Are Payday Loans Allowed in All States?
Although payday loans are allowed in most states, there are some states that prohibit their use. In many of the states that do allow payday loans, the states govern how much interest and fees can be charged and have set small loan cap rates. You can check out your state here.
Are You In Bad Credit?
Whether or not you’re approved with bad credit is contingent on the particular lender. In many cases, the lender doesn’t even pull a credit report. In cases where the lender does look at your credit report, the lender may not even use your credit scores. Because these are payday loans designed to be paid off with your paychecks, the lender is typically more interested in your banking account and your employment history so the lender knows there are means in which to pay back the loan.
Is There a Maximum to How Many Payday Loans I Can Get at One Time?
Once again, this is dependent on your state laws. Some states allow you to roll one payday loan into another. Some set limits to how many you can have in a one-year time. Others, on the other hand, have no limits.
What is the Application Process Like?
Although this varies from lender to lender, most customers claim that the ease of use is one of the most attractive features of payday loans. In most cases, all you have to do is provide proof of identification, income and a checking or savings account. You need a bank account because when you get the money, it’s usually wired into your account.
What About Approval?
With most payday loans, the applicant knows if he or she is approved or denied in a matter of minutes. After the lender informs you that you’ve been approved, you will be provided with information regarding terms, fees and conditions of the loan. If you have any questions, this is the time they are usually asked and answered. Consumers often get the money the same day they apply sometimes within hours.
How Can I Repay the Loan?
Depending on the lender, you may have the following options in repaying the loan.
• Physically bring your payment to the company.
• Have the payment debited out of your checking account automatically on your payday
• Provide the lender with a postdated check for the payment plus fees and interest.
• Sign a document authorizing the lender to electronically withdraw the payments from your account on a certain day.
If you have the funds, you can repay the loan early. The earlier you can repay the loan, the less you’ll pay in interest and fees. There is usually no repayment penalty fee unless you were notified of this when you obtained the loan.
If circumstances change and you think you may have difficulty making the payment on time, consider paying at least the interest and defer the balance if your state allows this practice. Again, check with your state laws.
How Much Would you like To Borrow?
The maximum amount you can borrow on a payday loan varies from state to state. While some have set caps, others have not. Regardless of what your state allows, try not to borrow more than you can pay out of your paycheck. Remember that as helpful as payday loans may be, they are designed to be a short-term fix.