Planning to Apply for a Payday Loan? Here's What You Need to Know
Payday loans are a quick, short-term financial solution for anyone in a bind or in need of instant cash for timely expenses or purchases. It sounds simple, but when it comes to loans, it’s always a good idea to do your research dutifully. After all, borrowing money is usually everyone’s last resort, especially when it is through a high-interest option like payday loans, so it’s normal to be hesitant. If you’re planning to apply for a payday loan, take a moment to read the following guide. Here’s all the information you’ll need in order to be sure you’re making the right decision.
Requirements
One of the perks of a payday loan is that it has simple requirements which makes it a highly feasible form of borrowing. First off, you have to be eighteen years of age or higher. Second, you must have an active checking account. It’s a type of bank account that offers great financial liquidity by allowing the depositing and withdrawal of money whenever needed. Third, you need proof of income because how else are you going to prove you can pay back the loan? Finally, you will need valid identification.
This includes a driver’s license, a valid passport, or an ID card, among other identification documents. If you have all the requirements, your loan should be approved by your lender in less than thirty minutes.
How the Loan Works
When you apply for a certain amount, after you’re approved, you are required to write a check with the full amount, plus the interest. This check is written with a future date. The process is very simple that many lenders choose to operate online under a legitimate license, which makes the approval and the money transfer much easier and faster than in on-ground lending facilities. As for your payment options, we’ve mentioned a singular postdated check, but some lenders offer the opportunity of repayment through multiple checks. Either way, the reason it’s called payday, if you haven’t figured it out yet, is that the money you borrow is meant to cover your basic needs and essential expenses until your payday.
Interest Rates
When compared to other types of loans, payday loans have quite high-interest rates, which is why you need to plan ahead before you borrow. Keep in mind, however, that the interest rate varies according to where you live. In Canada, for example, the range is around 15 to 19 dollars for every 100 dollars, depending on the province. Meanwhile, in the United States, it depends on the state, some states put a very low ceiling on interest rates, others leave it up to the lender.
Though, it’s important that you remember the nature of payday loans. Sure, they’re expensive, but for the fees you’re paying, you’ll be getting an instant approval, a hefty sum, and zero credit checks. Not only that but sometimes it’s even cheaper to get a payday loan than to apply for a personal loan with bad credit.
Advantages
This type of borrowing comes with plenty of benefits, especially if it’s needed for an urgent expense. If you’ve come upon a chance to invest but the time-window is too narrow for you to wait, a payday loan can help you out while paying for itself. Another benefit of instant approval is that when sudden expenses pop up, instead of finding yourself pushed up against the wall, you can easily find your way out with an urgent sum of money. Plus, if you happen to have a low credit score, there is no need to worry, lenders don’t care for your credit score as much as they care for your ability to pay back the loans.
Credit Score
You must be wondering why the credit score is unimportant when it comes to payday loans. Even though some lenders require a credit check, it’s not common because a payday loan is a short-term loan that’s determined based on your proof of income. This is good news if you’re worried about how a payday loan might affect your credit score. Unless your lender requests a credit check, and unless you fail to pay off your debt on time, there’s no need to worry about the loan’s effect on your credit score.
After reading all of the above, you should now have all the information you need to make a calculated decision. As you can see, payday loans have their pros and cons, both of which have a different impact on each individual. While you consider the extent of their impact, don’t forget to consider your financial future. Will you be able to repay the loan on time? Are you going to have to move some money around? Control your spending for a little while? It’s best to figure all of this out before you apply.
