Wondering what payday loans are? Payday loans are short-term loans that you pay back on your next payday. They’re usually for small amounts of money, like $500 or less.
Sounds simple enough, but is it worth it? Payday loans are quick and easy loans that can help you out when you’re in a pinch. However, they also come with a catch: high interest rates.
What are the benefits and drawbacks of payday loans? And are there better options? In this article, we’ll break down everything you need to know about payday loans.
What Are Payday Loans?
Payday loans let you borrow a small amount of money at a high interest rate for a short time. You write a check for the money you need plus a fee and give it to the lender. The lender gives you cash and keeps the check until your next payday. Then they cash the check and take the money back. Some people call payday loans cash advances or check advances.
>>Apply for payday loans on Money Mutual
Pros and Cons of Payday Loans
Online payday loans can be a lifesaver when you need cash fast. The thing is, they can also be a nightmare if you don’t know what you’re getting into.
Pros
- Fast Cash: You can get a payday loan in minutes, and have the money in your bank account within a day or two. This can be crucial if you have an urgent expense, such as a medical bill, a car repair, or a rent payment.
- Easy to Obtain: You don’t need much to qualify for a payday loan. Most lenders will only ask for your ID, your income proof, and your bank account details. You don’t need to have a good credit score, or any collateral.
- No Credit Check: Payday loans don’t affect your credit history, because lenders don’t report them to credit bureaus. This can be a plus if you have bad credit, or no credit at all.
Cons
- High Interest Rates: The APR for a payday loan can be as high as 400% or more, depending on the state you live in. That means you can end up paying back much more than you borrowed.
- Short Repayment Period: Payday loans are designed to be paid back in full on your next payday, which is usually within two weeks. If you can’t afford to do that, you may have to roll over the loan, which means paying more fees and interest.
- Additional Fees: If you can’t pay back the loan on time, lenders often charge additional fees. This can lead to a cycle of debt that can be difficult to break free from.
How Do Payday Loans Work?
The process of getting a payday loan is relatively straightforward. You’ll need to fill out an application, either online or in a store, and provide some basic information. This typically includes your name, address, income details, and your checking account details.
Applying for a Payday Loan
To apply for a payday loan, you’ll need some or all of the following:
- A valid ID
- Proof of income (like a pay stub or bank statement)
- An active checking account
- A personal check or electronic access to your bank account
After your application is approved, the lender will transfer the funds into your bank account or give you cash. Then, on your next payday, the lender will cash your check or withdraw the funds directly from your bank account.
How Much Can I Borrow with a Payday Loan?
Most states have laws that limit payday loan amounts. The maximum amount ranges from $300 to $1,000, depending on the state. However, some lenders might allow you to borrow more.
What Popular Lenders Can You Apply To?
There are many payday loan lenders available, both online and in physical branches. Here are a few popular options:
- Money Mutual: An online lender that offers short-term loans up to $2,500 depending on your state’s limits. The process is quick and easy, and you can receive funds in as little as 24 hours.
- Viva Payday Loans: This lender offers loans up to $5,000. It’s available in all states and the application process is simple and quick.
- BadCreditLoans: As the name suggests, this lender specializes in loans for individuals with bad credit. They offer loans ranging from $500 to $5,000.
- 247FastFunds: This lender offers loans up to $2,500. They have a fast approval process and offer flexible repayment options.
- CashUSA: This online lender offers loans ranging from $500 to $10,000. The application process is simple, and you can receive funds as soon as the next business day.
Payday Loan Interest Rates and Fees
Payday loans are known for their high interest rates and fees. The average APR on a payday loan is between 391% and 521%, but can be much higher in some cases. Essentially, for every $100 borrowed, the borrower will owe about $15 to $20 in interest and fees.
What if I Am in the Military?
According to the Military Lending Act (MLA), payday loans and other forms of short-term loans are prohibited for active-duty military members and their dependents. The MLA also caps interest rates on certain types of loans at 36%.
Repaying a Payday Loan
Repayment of payday loans is typically expected within two weeks, or by your next paycheck. The full amount of the loan, as well as the lender’s fee, must be paid in one lump sum. If you can’t pay back the loan on time, you might be able to “roll over” the loan to the next payday, but additional fees will apply.
What Is a Rollover Loan?
A rollover loan is when you pay the lender a fee to delay paying back the loan. The fee doesn’t reduce the loan amount, which means you’ll owe more the longer you delay repayment. This can lead to a cycle of debt that can be difficult to break free from.
Are There Options to Help Pay off My Payday Loan?
Several options could help you pay off your payday loan. Here are a few options:
- Debt Consolidation Loans: A debt consolidation loan can help you manage your debts by combining them into one loan with a lower interest rate.
- Credit Counseling: A credit counselor can help you manage your debt and negotiate with lenders on your behalf.
- Debt Settlement: In some cases, you might be able to settle your debts for less than you owe.
How Do Payday Loans Affect My Credit?
If you repay your payday loan on time, it shouldn’t have a significant impact on your credit score. However, if you fail to pay back your loan and it goes to collections, it will likely have a negative impact on your credit score.
Alternatives to Payday Loans
Payday loans might seem like a good option for fast cash, but other options could be less costly and safer. Some alternatives include:
- Personal Loans: You can use personal loans for larger expenses, such as medical bills, home repairs, or debt consolidation. Personal loans usually have lower interest rates and longer repayment terms than payday loans.
- Credit Cards: Credit cards usually have lower interest rates than payday loans and offer more flexibility. You can pay off your balance in full every month or make minimum payments. You can also use credit cards to build your credit score and access rewards and benefits.
- Credit Unions: Credit unions often offer small, short-term loans at lower interest rates than payday loans. They also provide financial education and counseling to help you manage your money better.
- Emergency Assistance Programs: They can provide emergency assistance, such as food, clothing, shelter, or cash. They can also connect you with social services programs, such as food stamps, Medicaid, or housing assistance.
>>Apply for payday loans on Money Mutual
FAQs
Let’s explore frequently asked questions about payday loans and how they work.
How Does a Payday Loan Work in Simple Terms?
A payday loan works like this:
- You apply for the loan, providing the lender with a post-dated check or permission to electronically withdraw money from your bank account on your next payday.
- The lender provides you with cash, and you repay the loan, plus fees and interest, on your next payday.
Is It a Good Idea to Get a Payday Loan?
While payday loans can provide quick cash in an emergency, they come with high interest rates and fees, and a short repayment period, making them a costly and potentially risky option. Before taking out a payday loan, consider other options like personal loans, credit cards, or borrowing from friends or family.
Do Payday Loans Hurt Your Credit?
Your credit score is safe if you pay back your payday loan on time. However, if you miss the payment and the lender sends your debt to collections, your credit score will drop.
Are Payday Loans Legal?
Payday loans are legal in many states, but not in all. In some states, some laws limit the amount you can borrow and the fees and interest that can be charged. Other states, however, do not regulate payday loans, making them a risky option.
What if I Can’t Repay a Payday Loan?
If you can’t repay a payday loan, you might be able to roll over the loan into a new one, but this will result in additional fees and interest. Some states allow this, while others do not. If you can’t make your payment, contact your lender as soon as possible to discuss your options.
Conclusion
If you need a quick short-term loan, apply online for a payday loan using platforms such as Money Mutual. The application process is quick and straightforward, and you can see the funds in your account within one business day.
Payday loans provide quick access to cash but often come with high interest rates and fees. Borrowers should carefully consider their financial situation and explore alternative options before opting for a payday loan to avoid potential long-term financial difficulties.
Disclaimer: This article contains sponsored marketing content. It is intended for promotional purposes and should not be considered as an endorsement or recommendation by our website. Readers are encouraged to conduct their own research and exercise their own judgment before making any decisions based on the information provided in this article.
