Fast Cash: What You Need to Know About Personal Payday Loans
What do you know about personal payday loans?
Payday loans have a bad reputation. They’re seen as lenders who take advantage of people and keep them in debt.
Yet, millions of people seek out and rely on payday loans to make ends meet. About 10 million people choose to take out a payday loan a year.
Payday loans can be a useful tool to bridge a gap in funds. They can also get you in financial trouble if you don’t know how to utilize the tool.
Read on to find out what payday loans are, how they work, and how you can get one.
What is a Payday Loan?
A payday loan is a short-term loan for a low dollar amount, typically between $500 – $1000.
People take them out for a variety of reasons, such as an unexpected emergency like a car repaired or pay for an unexpected medical expense. About 69% of borrowers take out payday loans to pay for basic expenses like rent, utilities, and shelter.
That statistic shouldn’t be surprising when more than 25% of the population lives paycheck to paycheck. People turn to payday loans when they have bad credit and they don’t want to ask friends or family for money.
If you’re in need of fast cash, there are some options along with personal payday loans. There are personal loans that you can take out. A personal loan is a longer-term loan, that’s usually paid off over the course of a few years. A personal loan is a better option if you need more money, have good credit, and can handle monthly payments.
How Personal Payday Loans Work
Before you take out a personal payday loan, you should understand how they work. Otherwise, you could be caught in a payday loan tornado.
When you take out a payday loan, you have a couple of options. You can go to a retail location or get a payday loan online.
The length of the loan lasts about 14 days, which is when most people get paid. When you do get your next paycheck, you’re expected to pay back the entire loan plus fees.
The fees are where you can get into trouble. A payday lender can add interest and fees between $15-$30 per $100 you take out. Let’s say you take out $300. That payday loan now becomes between $345 – $390, all due on your next payday. The interest charged can be as high as 400%, which is way more than credit cards at 29%.
If you don’t pay back the loan in time, you’re likely to have to take out another payday loan to pay back the first loan, then pay for the amount and fees for the second loan. That $300 loan could cost you much more than $300 by the time it’s all said and done.
That’s how the payday loan tornado starts, and many borrowers can’t get out it.
The payday loan industry is a regulated industry, so how much you can take out depends on the lender that you choose and where you live. These regulations are in place to protect borrowers from getting in an endless stream of debt.
California, for example, allows lenders to make one loan for up to $300. They can’t charge more than $15 per $100 borrowed.
In New Jersey and New York, payday loans are completely prohibited. On the other hand, in Delaware, you can borrow up to $1000.
The amount of money you make also plays a role in how much you can borrow. Lenders aren’t going to give you more than you make because they want the fund to be paid back on time.
How to Get a Payday Loan
A payday loan isn’t something that you automatically get just because you fill out an application form. The qualifications aren’t as strict as working with a bank, but there are standards that you have to meet to prove you can pay back the loan.
You want to make sure that you find a reputable lender to work with. There are lenders for all types of situations, whether they’re online only or they have franchises all over the country. They have loans for people with good credit, bad credit and anywhere in between. You can check out these payday loans direct lenders to find out more.
You need to do a few things before you’re approved for a payday loan. Meet the minimum age requirements, fill out an application, and prove your income. There are a lot of payday lenders who won’t bother to look at your credit. They just look at your income as your ability to pay the loan amount.
If you’re a standard employee, you’ll just bring your W-2 form or your last few pay stubs. If you’re self-employed, paid only in cash, you are likely to be denied a payday loan.
Lenders need to see actual income earned, and they look for income stability. Even if you’re collecting unemployment, that doesn’t count as income.
When you are approved for a payday loan, do everything in your power to pay back the loan amount and fees on time.
Personal Payday Loans Can Work For You
There’s a reason why millions of people turn to payday loans. They can help cover expenses in an emergency situation or bridge a gap between paychecks.
As with any financial tool like a credit card or loan, personal payday loans have to be used responsibly. Make sure that you only borrow what you know you can pay back within the terms of the loan.
If you don’t do that, then you’re running the risk of being caught in a cycle of debt. Your best bet is to take out a small loan, pay it back on time with the fees.
Want more financial tips? Check out these ways you can make money online.