Payday loans can be an excellent fix when dealing with an emergency need. However, if you have ever gotten a payday loan, I know you know why most states do not permit them.
If you apply for a payday loan, you better be sure to repay it on time. Also, if you are new to these loans, you must know some things before applying for a payday loan.
But first, I need you to understand more about payday loans.
What Is a Payday Loan?
A payday loan is a loan that you pay all at once. There is nothing like installments with these loans. In addition, many states do not permit payday loans because of their nature.
Once you take a payday loan, you should be sure to repay it during your next paycheck. Generally, payday loans mature at a maximum of 2 weeks to mature.
How to Qualify For a Payday Loan
- Have more than 18 years
- Prove that you get regular income
- Possess an identification document
- You should provide an active identification document
- You should have an active checking account
What You Should Know About Payday Loans
The Interest Rates Are Very High
This characteristic is the one that makes many states restrict payday loans operations. Payday loans have very high-interest rates that start from 390%. An APR of 390% is too much compared to a typical loan.
However, payday loan lenders claim that the clients they deal with are high risk, hence the high-interest rates. So if you want to apply for a payday loans bad credit instant approval, be ready for the high rates.
There Are No Credit Checks
This might be the only interesting fact about payday loans. If you have a bad credit history, you will still get a payday loan. But you have to prove that you can comfortably repay the loan.
Payday loan lenders stand to help those with bad credit—when other lenders cannot. And that’s why you will find most people with payday loans regardless of the interest rates.
They Are Short-term Loans
Do not expect to take a payday loan to do a significant project. You will only enjoy the comfort for 16 days, and the repayment knocks on your door. That’s why we call them payday loans. You apply and repay during your upcoming payday.
However, there is something good with their short-term nature. You will not stay in debt for so long. If you have other projects to perform, it will be possible because your paycheck will be free.
If you need some groceries and you have no savings somewhere, payday loans can be of good help to you. The application process is easy, and the approval is simple as well. In most instances, you can get a payday loan online, so you don’t have to walk looking for a suitable lender.
Once you apply for a payday loan, you will get the funds into your checking account within 24 hours. And that timeframe is reasonable if you need cash for an emergency.
A Small Amount of Loan
Still, again, don’t expect to get a payday loan to buy a home or a brand new car. The much you can get from payday loans is $2000, suitable for purchasing small items like groceries.
Some lenders cannot give you more than you earn. This is because they will deduct all of it from your next paycheck. So, they will not want to empty your bank account.
If You Skip a Payment, the Lender Doubles the Interests
You are supposed to repay your payday loan during your next paycheck. However, if you miss that payment, your lender will double the stake—making it harder to repay the loan. And that’s how you will end up in a debt trap.
So, if you have to take a payday loan, ensure that you have budgeted your income well to avoid skipping the payment.
Payday Loans Do Not Build Credit Scores
Even if you make timely repayments of a payday loan, there will never be an impact on your credit score. However, other lenders will be able to see your credit history, and payday lenders may bar them from trusting you.
Therefore, having a payday loan in your credit history might bring harm to your future borrowing. So, do not apply for a payday loan expecting to rebuild your credit score.
The Bottom Line
Getting a payday loan is easy, but you should be more careful when dealing with them. The high-interest rates can harm your finances, and it’s easier to get into a debt trap.
The best thing that you should try out is to make more money to stay as much as possible out of debt. Remember, it will be challenging to gain financial freedom once you have more debts than savings.