How to Get a Payday Loan: A Step-By-Step Guide

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What is a Payday Loan?

In this article, we will tell you how to get a payday loan. Payday loans are short-term borrowings where a lender will offer a high interest rate based on your income. Usually, its principal is taken from a percentage of your next paycheck.

The interest rate on payday loans is high for short-term loans. These loans are also known as check advance loans or cash advance loans.

How to get a payday loan

Using Payday Loans

Payday loans are a type of unsecured personal loan and don’t require any collateral, but the interest rate is very high. These loans could be viewed as predatory lending because they don’t consider the lender’s ability to repay the loan. They can create a debt trap for customers by charging borrowers added fees. If you’re looking for payday loans, consider other safer personal loan alternatives.

How Do Payday Loans Work?

Payday loan providers need proof of your income, usually your employer’s pay stubs. They will lend you money, but you have to repay it in a short time, typically 30 days or fewer.

Payday lenders don’t check your ability to pay back the loan; payday lenders take on a lot of risk. But they will cover the risk by charging high interest rates. Sometimes, they even charge high fees if you miss your repayments. Sometimes you have to borrow more money to cover the repayments of the first loan, and that’s why payday loans can prove dangerous for borrowers.

How to Get a Payday Loan?

Learning how to get a loan can be difficult for many people. Payday lenders are usually small credit merchants with physical stores where customers can apply for and be approved for loans on-site. Some online lenders offer payday services.

You will need to provide pay stubs from your employer that show your current income to complete a payday loan application. Payday lenders loan principal is based on the borrower’s predicted short-term income percentage. Lenders don’t include your ability to repay the loan or don’t conduct a full credit check.

What are Payday Loan Interest Rates?

The annual percentage rate (APR) charged by payday lenders is 780%; the average interest rate is close to 400%.

Many states have passed laws outlawing payday loans of any kind, including Arizona, Arkansas, Connecticut, Colorado, Georgia, Montana, Massachusetts, Maryland, New York, North Carolina, New Jersey, New Hampshire, Pennsylvania, South Dakota, Vermont, and West Virginia.

For example, in California, a payday lender can charge an APR of 460% for a $100 loan for 14 days. You have to be aware of the finance charges on these types of loans.

The repayment time for payday loans is 30 days or less. The loans sometimes add additional costs, and in the end, they get repeat customers. Many court cases have been filed against payday loans. The government created a lending law in 2008 to build a fair lending market for customers. Consider using a personal loan calculator to know how much interest you can afford.

Are Payday Loans Legal?

Regulations governing payday lenders were put in place in 2017 after being recommended in 2016 by the Obama administration, which, led by Richard Cordray, passed rules to protect customers from “debt traps.”

According to rules, before the loan is made, lenders require essential underwriting provisions to understand the borrower’s ability to repay the loan without affecting living expenses. The rules also require lenders to send written notice to the borrower before collecting money from their account. If lenders fail to collect money from the borrower’s bank account two times, they can’t try again without the borrower’s permission. These rules become mandatory on June 13, 2022.

But on July 7, 2020, the CFPB issued a final rule in which they cancelled the mandatory underwriting provision and the limitation on the number of repeated attempts to collect money from a borrower’s account remained the same.

Are Payday Loans Fixed or Variable?

The interest rate on these loans is fixed because payday loans are paid off in one single payment when you get your paycheck. Many lenders don’t even charge an interest rate; instead, they charge a fixed fee, which can range from $10 to $30 per $100.

Is a Payday Loan Secured or Unsecured?

Payday loans are usually unsecured loans. Unsecured loans don’t require collateral or assets, but the lender may ask you to give permission to take money from your bank, prepaid card, or credit union. Some lenders ask you to write a check for the repayment account, which the lender will use when the loan term is over. Federal law prevents payday lenders from requiring borrowers to consent to “preauthorized” (recurring) electronic transfers to get a payday loan.

How Long Are Payday Loans Stored in the System?

Payday loans may be kept for six to ten years by credit bureaus, which can negatively affect your credit score and your ability to qualify for a loan in the future. Payday lenders don’t report to credit bureaus, even in the case of delayed payments.

If you repay your loan on time, it still has a positive effect on your credit history because lenders don’t report to credit bureaus. But if you’re unable to repay your loan and your debt is put under collection agency, then it will negatively affect your credit history.

Can Payday Loan Debt Be Forgiven?

It’s very rare that your payday loan debt is forgiven. This is because lenders make a lot of money from the interest rates that they charge on payday loans.

Try to repay your loan as early as you can because the interest rate on payday loans is higher, and then you have to pay the interest amount. Also, if you delay the loan payments, your account may be sent to the loan agency, which will pursue you to recover the debt you owe, including interest rates.

Are Payday Loans Available Without a Bank Account?

Yes, you can get a payday loan without a bank account. But lenders who don’t need bank accounts charge high interest rates. Sometimes a prepaid card account is enough to qualify, but some lenders still need a bank account.

These loans cost so much and are difficult to repay, so it’s better to avoid payday loans. If you don’t repay the loan or delay the payment, more fees may add up. Only take payday loans if you are sure that you will repay the loan easily.

The Bottom Line

Learning how to get a payday loan is very important before you start doing it. Payday loans are short-term loans that don’t require collateral or sometimes even a bank account. The main problems with payday loans are their high interest rates and very high fees.

Borrowers should take every step with proper knowledge. You may qualify for payday loans easily because lenders don’t consider borrowers ability to repay. Sometimes they charge hidden fees to borrowers. So, if you’re looking for payday loans, consider other safer alternatives to payday loans.

Frequently Asked Questions

Where can I get a payday loan?

You can get a payday loan through online lenders or directly in-store. If you’re applying through an online lender, you have to complete the payday loan application. They don’t consider your credit score, but they charge a very high interest rate. After submitting the application, you will receive an instant decision. If your loan gets approved, the loan money will be sent directly to your credit card, if available, or bank account.

If you are going to apply in-store, you just have to find a store near you to apply in person. After submitting the application, you will receive an instant decision on whether you qualify or not. If your loan was approved, walk out with cash in hand immediately.

How can I get money before payday?

Borrowing money that you repay with a future paycheck is a common way to cover expenses until the next paycheck. Both payday loans and cash advance apps allow you to borrow money before your next payday.

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