If you need quick cash, a payday loan may be the solution for you. A payday loan is a short-term loan that is typically due on your next payday. It can be used to cover unexpected expenses or to bridge the gap between paychecks. If you are approved at Loans General, payday lenders deposit funds directly into your bank account. If you’re looking to learn more about what a payday loan is and how it works, keep reading below!
What is a payday loan used for?
Now that we know the answer to, “what is a payday loan?” we can find out more about what payday loans are most commonly used for. Here is a list of some of the most popular uses for payday loans:
- Unexpected medical bills
- Car repairs
- Home repairs
These are just a few examples of what people use payday loans for. If you have an unexpected expense that you need to cover, a payday loan may be a good option for you and avoid the personal loan interest rates.
How do payday loans work?
Payday loans are also called payday lending. It involves giving a borrower cash in exchange for a postdated check or electronic access to the borrower’s bank account. The loan is due on the borrower’s next payday, typically two weeks to four weeks later.
Payday loans are usually structured as two-week loans, meaning that you will write a personal check dated two weeks from the day you take out the loan. The check will be for the amount of the loan plus interest and fees.
If you do not have enough money in your account to cover the check, you may be charged additional fees by your bank and the lender. This can quickly turn a small loan into a large debt.
Payday loans are like personal loans except personal loan lenders don’t have to rely on the borrower’s next paycheck for repayment. Instead, most personal loan lenders will allow borrowers to repay their loans over a few months to a few years.
However, just like payday loans, personal loans can also be expensive. Personal loan APRs can range from around ten percent to more than thirty and the consumer financial protection bureau warns that fees and penalties can add up quickly.
So what’s the alternative to expensive personal loans and avoiding finance charges? A payday loan debt may be a better choice.
The benefits of payday loans
There are a lot of benefits to payday loans and using a payday lender. Here are 10 benefits:
#1 – You can get your cash fast. If you need money to cover an emergency expense, like a medical bill or car repair, a payday loan can help.
#2 – Unlike personal loans from the bank or credit unions, you don’t need good credit to get a payday loan.
#3 – A storefront payday lender will have payday loan alternatives for you to get a payday loan online and electronically withdraw money for the loan amount the same day.
#4 – If you have a bad experience with one payday lender, you can try another one. There are many different payday lenders out there.
#5 – If you need more money than what a typical payday loan offers, some lenders will offer installment loans. These loans allow you to borrow larger amounts of money and pay back the loan over time in small payments.
#6 – If you have a financial emergency and need cash quickly, a payday loan may be the best option for you. Payday loans are easy to get and can give you the money you need fast.
#7 – Remember that a payday loan is a short-term loan. This means that you will need to pay back the loan within a few weeks or months.
#8 – Be sure to read the terms and conditions of your payday loan carefully before you sign any paperwork. Payday loans can be very expensive if you don’t pay them back on time.
#9 – If you’re not sure whether a payday loan is right for you, there are other online lenders you can borrow money from or get a cash advance from.
#10 – Always shop around for the best interest rates and terms before you apply for a payday loan. Payday loans can be very expensive, so it’s important to find the best deal possible.
Payday loans are not for everyone but they can be a helpful tool if used correctly. If you are considering taking out a payday loan, make sure you understand all the costs associated with them and only borrow what you can afford to pay back. Payday loans can be a great way to get quick cash when you need it, but they can also be very expensive if you don’t repay them.
Is there a credit check for payday loans?
Payday lenders may check your credit report or what’s reported to the credit bureaus, but there is no hard credit check with our service so you don’t have to worry about your credit score going down when you fill out a payday loan application.
The risks of personal loans and payday lenders
All loans have an interest rate added to the maximum loan amount you’re able to borrow. The interest is what the lender charges you for loaning you the money. With a personal loan, the interest rate is usually fixed, which means it won’t change over the life of your loan. This can make personal loans a good choice if you need to borrow a large sum of money and want to know what your one lump sum payment will be at the end of your loan term.
Interest rate caps for check advance loans
An unsecured loan or check advance loan from a payday lender may have a higher interest rate than a personal loan, but they also tend to come with additional fees. Payday lenders often charge an initial fee just for borrowing the money, along with a monthly maintenance fee. Payday borrowers with advance loans should have the ability to repay not only the fees the loan proceeds by the due date but also the interest rates and any other associated finance charges.
Payday loans have a much higher interest rate than personal loans. This is because they’re considered to be high-risk loans by lenders. The average interest rate for a payday loan is around 400%. This means that if you borrowed $500 from a payday lender, you would need to repay $2000 at the end of your loan term.
Payday loans are also much shorter in terms of the loan term. Most payday loans need to be repaid within two weeks, and some lenders will only give you a week to repay the loan. This means that you need to be sure that you can repay the loan in such a short amount of time.
If you’re considering taking out a payday loan, be sure to understand the terms and conditions of the loan before signing any paperwork. You should also shop around to find the best interest rate and the shortest loan term possible. And be sure to only borrow what you can afford to repay.
How to get the most out of your payday loan
To permit payday lending, what the law does is exempt these types of lenders from the Truth in Lending Act. This particular act requires all lenders, including payday lenders, to disclose the cost of borrowing upfront to customers.
Payday loans are different in that they’re not required by law to adhere to this regulation thus allowing them to charge what can be considered very high fees for what is essentially a short-term loan.
Higher Fees on Payday Loans
For example, let’s say you take out a $500 payday loan with a fee of $75. In two weeks, you’ll need to repay the entire $575 plus any additional fees or charges that may have been added on. That comes out to an annual percentage rate (APR) of more than 39%.
In comparison, the APR for a credit card can be anywhere from about 12% to 30%, and personal loans tend to have APRs that range from about six percent to 36%. As you can see, the fees associated with payday loans are much higher.
It is important to only rely on payday loans in cases of emergency and to make sure that you can repay the loan plus fees within the time frame that you have agreed to. Payday loans are not a long-term solution to financial problems, and using them repeatedly can lead to more debt and higher fees. If you find yourself in a situation where you need to take out a payday loan, be sure to shop around for the best rates and terms.
There are some things you should know before taking out a payday loan:
The fees associated with payday loans are much higher than other types of loans.
- You will need to repay the entire loan plus fees within a short period of time (usually two weeks).
- Payday loans should only be used in cases of emergency and not regularly.
Will I be approved for a payday loan with poor credit?
The way payday loans work, a lender may look at credit union report and credit score, but you could still be approved with bad credit. A borrower’s ability to repay the repayment terms is what matters most. It only takes a few minutes to apply for a payday loan online, with electronic fund transfers directly into bank accounts on approval (you must have a valid savings account or checking account, a prepaid card account will not work).