What are payday loans? How much can I borrow? Am I eligible for a payday loan? What loan options do people with bad credit have? For how long can payday loans be taken? How expensive are payday loans? How do these types of loans work? How can I apply? If you asked yourself any of those questions then this article can help you understand it.
What are payday loans?
Payday loans are designed for working people who for any reason run out of cash between their paydays. Reasons can be anything like bad budgeting, unexpected bill, some unplanned events and so on. The main idea of payday and cash loans is to bridge the time with extra cash until the next payday. Ideally this should be repaid in one installment and if that is not possible then in as few payments as possible. Payday and cash loans are usually unsecured what means you don’t have to provide any security to the lender.
How much can I borrow?
The payday loans are for small amounts only. Usually the minimum is $100 and maximum $1000 but that depends on your income and even higher amounts may be possible. Once repaid, the loan can be easily redrawn. Most payday loan lending companies allow even extensions.
Am I eligible for a payday loan?
The eligibility criteria are very relaxed. The only things you need to meet are: have regular income deposited to a bank account, not being bankrupt, to be 18 years old, have only one current payday loan at a time per person and sometimes per household and be resident or citizen. That’s about it.
What loan options do people with bad credit have?
If you just have some bad credit record and are not bankrupt then should be eligible for a bad credit or payday loan. Otherwise if you are bankrupt or have any summary installment order then the only option really are pawn shops or secured loans. Detail options should be discussed with the lender. They are usually happy to offer some solutions.
For how long can payday loans be taken?
Theoretically the payday loans can be taken for any length of time. But practically they should be taken only for days or weeks. In rare circumstances for a month or so, but not too many months. Otherwise they become too expensive. For longer terms alternative options like credit cards or personal loans should be considered.
How expensive are payday loans?
The interest rates are very high – between 400% and 800% p.a. (yearly). Such high interest can be considered exorbitant, but there are few things to remember: the amounts borrowed are small, payday loans are for short time only and lenders usually don’t charge loan application fees. If borrowed $200 for 2 weeks on 500% interest then total repayment will be $238 (interest $38). Bank overdraft would cost $25 establishment fee, $5 maintenance fee and $2 interest, total fees $32 and much more hassle to arrange it.
How these types of loans work? How can I apply?
The process to get payday loan is usually simple and fast. Many payday loans providers let you apply over the internet, asking few basic questions. If it’s your first time applying for a payday loan then after submitting online application they send you few forms to sig. These can be faxed or scanned and emailed back. You will need a copy of your bank account statements (proving regular income), proof of address and photo ID. Some lenders offer slightly lower interest if you let them make a credit check on you or contact your employer. But these are not mandatory.
Once all done, approval and money transfer is then quick – overnight is free or same day within an hour for a fee. Second or subsequent time you apply for a payday loan the process is even simpler. Just filling out application online without a need for additional paperwork.
Payday loans can be a great way to bridge time between paydays if you run short of money. But don’t allow it to revolve, otherwise it will become very expensive financing. If you struggle repaying it then rather get a personal loan from bank. And also stay away from loan sharks who charge more than 800% p.a. or add extra fees.