What Is a Payday Loan and How Does It Work?
When an urgent bill lands in your mailbox and your checking account is low, do you know where to access money quickly? Without sufficient emergency savings in the bank or a loan from a friend, there are a few ways to borrow money. Depending on your credit score, you may have limited options available to you. People with a “low” to “fair” credit rating might have fewer lenders and/or types of loans available than those with a “good” or better credit rating.
One of the quickest methods to borrow money, especially for people with less-than-perfect credit, is a payday loan. Read on to learn more about payday loans, and where you can apply for one today.
What is a Payday Loan?
A payday loan, sometimes referred to as a cash advance, is a type of unsecured short-term loan that’s designed to help cover emergency expenses between paychecks. While the time it takes to pay out an approved loan application can vary by company, some may be able to fund payday loans within a day or less.
What is a Short-Term Loan?
A short-term loan is normally repaid in less time than other types of loans, such as auto loans or mortgages. Short-term loans typically do not require collateral, or security, for the loan. Because of this, short-term and/or payday loans are normally issued for smaller dollar amounts than other types of longer-term loans. They can also carry higher interest rates than other loans.
How Much Money Can I Borrow With a Payday Loan?
Payday loans are generally issued for $500 or less. However, the amount of money that you can borrow with a payday loan can depend on a few factors, like your borrowing history, the lender and/or state and federal restrictions. If you’re not satisfied with the loan offer from one creditor, it may help to apply with another lender or for a different type of loan.
How Does a Payday Loan Work?
Keep in mind that loan availability, principal amount and borrower’s requirements can vary by lender and location. The following example is for illustrative purposes only:
Chris is steadily employed and usually is on top of his budget. However, he just found out that his car needs an urgent repair that he can’t afford with the money in his savings account. Unfortunately, he needs his car to drive to work, so this repair can’t wait.
Chris needs $500 quick. He decides to look online for a quick loan. Since he’s steadily employed, over 18 years old, a U.S. citizen and has a checking account, he’s eligible for a payday loan, although age restrictions can vary by state. Chris decides to apply online since he found a lender with a simple application process, instant loan decision and quick funds deposit. Chris’s loan repayment details depend on specifics like his location and loan amount, but he’ll review his contract before signing for the loan. Following loan approval, Chris’s payday loan is funded quickly, and he can get back to his day.
How Long Do I Have to Pay Back My Payday Loan?
While it depends on your specific lender and loan agreement, payday loans are typically repaid in a few weeks or less. Payday loans, sometimes referred to as cash advances, act as a third-party advance on the borrower’s next paycheck.
You’ll have the opportunity to review all loan details, including the repayment schedule, prior to signing the agreement. Make sure you can reasonably afford to repay any loan before signing.
What Are the Requirements for a Payday Loan?
Payday loan requirements may vary by creditor and location. Lenders generally have the following minimum requirements for a payday loan:
- At least 18 years of age (may vary based on location)
- U.S. citizenship or permanent resident status
- Active checking account
- A steady, verifiable income
Can I Take Out a Payday Loan With Poor Credit?
Though a poor credit score can affect your ability to borrow money, some lenders may review application factors beyond credit scores and/or use alternative credit checks. Application requirements vary by lender, but you may be able to take out a payday loan with less-than-perfect credit. While it may cost more to take out a loan with poor credit, it may be better than common alternatives, such as bank overdrafts.
Where Can I Get a Payday Loan?
Payday loans are available from a variety of sources, like physical payday loan stores and some banks, to online creditors and alternative lenders. You may also be able to apply for a payday loan through your employer, if applicable.
But when you’re in need of emergency cash, time is of the essence. That’s why CashNetUSA offers convenient payday loan alternatives to help you out of a financial bind. You can apply in minutes, and if approved, receive the fast cash you need to get back on your feet.
The information in this article is provided for educational and informational purposes only, without any express or implied warranty of any kind, including warranties of accuracy, completeness or fitness for any particular purpose. The information in this article is not intended to be and does not constitute financial, legal or any other advice. The information in this article is general in nature and is not specific to you the user or anyone else.