A payday loan is beneficial for people who need cash urgently to manage any emergency. Here, you don’t have to go through a lengthy application process to get approval for a loan. You’re also not required to have a good credit score to get the approval for the loan. However, you need to know certain facts before you take out a payday loan. Knowing the facts about payday loans can help you avoid financial hassles in the long run.
Here you go:
1. You can get the loan with bad credit
A credit check is not required when you apply for the payday loan. This is considered to be one of the greatest advantages of a payday loan. Therefore, if you have bad credit then you are still eligible to apply for this loan. But, keep in mind that you should pay off the loan on time otherwise it might be difficult to come out from the vicious cycle of debt.
2. You can fulfill your immediate need for cash
Payday loans are not for large purchases. It addresses the immediate need of cash for people. When you need cash very fast, there is no alternative to payday loans. You can manage unexpected problems with the help of payday loans. However, you should repay it within time.
3. You need to match some criteria
The criteria for being eligible for payday loans are quite simple. For example,
- You need to be a citizen of America.
- You need to be eighteen years old at least.
- You need to have a constant source of income for at least past six months.
- You need to have a checking or savings account.
4. Bad credit borrowers can get steep interest rates
The most admired fact about payday loans is that they don’t require any credit check. Thus even if you have tarnished credit, you will be able to take out a payday loan. Hence for some people, these are the only source of cash when they are in need. But, if you have bad credit, then you will get steep and high-interest rates with the loan.
5. Interest rates are higher with online payday loans
Online payday loans come with higher interest. Though taking an online payday loan is easier, but you have to repay it properly to avoid high-interest payday loan debt.
6. You need to provide proof of your income
You need to show a proper income to get approval for a payday loan. If you’re unable to show your lender the proof of your identity, employment or income you won’t get the approval.
7. Your application for a payday loan can be canceled
If you have recently filed bankruptcy and don’t have a checking account or have a history of over-drafting checking accounts and unpaid bills, then your application will be denied. When you’ll approach a lender, clarify some specific conditions to prevent denial of your application.
8. There is a borrowing limit
The amount that you can take out a payday loan depends on certain factors. You can take out a limited amount to serve your emergency condition. It also depends on your monthly income as you have to repay the loan immediately when you get your next pay stub. It is often found that some payday lenders can lend up to $1,500 depending on the borrower’s financial condition. But some lenders are unwilling to take the risk and can extend only up to $500. Thus, you have to search for a lender who will be eager to lend you the amount that you require to meet the emergency situation.
9. Beware of illegal lenders
Some payday lenders run a fake payday lending company to frau people who urgently need money. In most cases, these fake lenders are very generous and kind to the borrowers. They convince the borrower to reveal the bank account for an auto deduction purpose. Once they get all the details, they take all the money from the account and run away. So, try to take out a payday loan from a reputable institution who follows payday loan lending laws. So, search for the authentic payday lender to take out payday loan.
10. Know your state’s payday lending policy
Remember, some states in the USA don’t allow payday lending. But there are some lenders who tell people that they have permission to lend money in states where payday lending is now allowed. These lenders are called tribal lenders. So, know the payday lending policy of the state where you stay before taking out a payday loan. Otherwise, the tribal lenders can fraud you.
11. Know the Truth in Lending Act
You must try to gain knowledge about the Truth in Lending Act which has been established to protect you from the false and misleading financial lending industry. According to the law, the lender is supposed to tell all the costs associated with the payday loan to guide the borrowers properly.
12. Defaulting of payday loan aggravate debt problems
If you default on your payday loan payments, then you will be in a vicious cycle of debts. Thus, you should try to understand how to get rid of payday loans. If you feel that you can repay the payments, then talk to your lender and request an extended payment plan. This way you can avoid high-interest payday loan debt. However, make sure you make all the payments on your payday loan.
Lastly, a payday loan helps you to get money easily, but you should rely on this for every purchase, Try to learn how to save money. This will help you to avoid unnecessary debt payments. You can also meet all your needs by saving money without taking our loan. Also, if you have to take out a payday loan, then check the authenticity of the lender and your state laws to avoid fake lenders.