What is a payday loan and how does it work?
It’s a small, short term unsecured loan (usually for two weeks) which needs to be repaid in full with high interest (often times over 500%) by the borrower on the date when he receives his pay. For example if you borrow $200, and have to repay it in full $280 the next day you will get your pay.
Nowadays payday loans are often tied to employer payroll, but the borrower has to have a checking account and provide information about it. In some cases, the borrower needs to be employed for a month or more (in states like California). These kind of loans can usually be taken from an online lender, although there are payday loan store in some states.
Are payday loans available in my state?
Payday loans are available in almost all states of USA with some exceptions.
How much can I borrow?
Maximum size of the loan varies by state, for example in Alabama, borrowers can take only $350. Usually $600-700 are common sizes.
Can spouses have separate loans?
Yes. One person has their own payroll and will have to pay the loan on time. Spouses can also have their own accounts and take payday loans from each account.
Do I need to be employed? Can I be retired?
As long as you have a source of income, you can be retired to apply for a payday loan. Because the loan is a short term one, so that does not matter.
Do I need collateral to apply for a payday loan?
Yes, collateral is a must for you to apply for the payday loan. Because if the lender feels that there is not much risk for them to approve you, then they would likely decline your loan application.
Is there any cost to apply for the loan?
No, applying for the payday loan is free and does not involve any cost. But if you choose to accept the loan and get it approved, then you need to pay the lender fees or interest.
How will I know if I am approved? When will I receive my funds?
It depends on the lender. Some lenders will give you an instant decision so you can get your cash right away. Others will take longer, usually a few hours or even a day or two.
Will I need a fax machine to apply for a loan?
No, you do not need a fax machine to apply for the payday loan. As long as you have a computer and internet access, you can complete the application. So it does not matter if you have a fax machine or not.
When will the loan be due?
As the payday loan is short term in nature, it has a deadline. This is the date when you will need to pay back the loan. The payday loan is supposed to help you with emergency situations, so you can use it as soon as possible. You must pay back your loan on time so that you do not miss a payment. This will not only result in late payment fees but also hurt your credit score. If you cannot pay back the loan on time, then you will need to pay a fee as well. Some lenders charge more than $25 just for that.
How and when can I pay back?
You can pay back your payday loan online or at the lender’s office. As long as you have internet access, you can use the lender’s website to make your payment. Otherwise, you can make a payment at the lender’s office in person or by phone. It is not recommended to go and give money in cash, since there will be no proof of the transaction.
If I pay off my loan early, how does that affect my finance charges?
If you pay off your payday loan early, then the lender will refund part of the finance charges. The lender has to calculate when is the next time the due date comes around. That’s the date when they will subtract the interest that you have already paid from your loan. After that, they will apply any late fee if you are behind in payments.
What if I change my mind and decide to cancel my loan?
If you change your mind about the payday loan, then it is better to notify the lender right away. As long as you have given the lender more than two business days prior to the payment deadline, they will refund all of the money that they have charged you. The lender will get the funds from your bank account and you do not need to return any money in person. That is a very good deal if you change your mind, so make sure to ask about it in advance.
Can I refinance my loan?
If you have an existing loan, then you are not allowed to refinance it again. Payday lenders do not allow their borrowers to refinance their loans, because it means the lender loses out on the interest. In other words, if you refinance the loan then you will need to pay a lot more in the long term than if you just pay it off with the amount that you initially borrowed. That’s why payday lenders are wary of borrowers refinancing their loans.
What do I need to apply for a payday loan?
- Driver’s license for identification.
- A checking accoun
- Some recent utility bills.
That’s pretty much it. To apply online, you can enter some personal information to an application. You will be redirected to your bank website to login. After that you may review the terms of the loan, approve them and fill in some fields there and go back to the payday loan website again. In a couple of minutes or so you will receive an e-mail confirmation that your loan has been approved or denied with a link to take the next steps (or sometimes they give you the lender’s phone number to call).
How do I apply for a loan?
Online payday loan applications on the lender’s websites are pretty straightforward and simple. You can start filling in some information about yourself (such as name, address, e-mail, phone number, employment details and many others) and then select your loan amount. Check with interest rate and fees if they charge for any processing of the application (usually it’s not much).
If you like to go with them – complete all required fields such as checking account number, which will be attached to your application. After you’ve done with that, select how soon you need your money and the term of the loan. This is when you can say that this is the biggest scam from all online payday loans scams 🙂 The term is usually from 2 to 30 days (or even more). And there are these things called “rolling over” on payday loans where a lender charges additional fees on every day that you roll over your loan till you take it back. Yes, some lenders may offer longer terms but even that might be problematic sometimes.
What are the requirements to apply for a payday loan?
- You need to be employed and have a source of income. If you are self-employed then you need to have a business account and a tax number to apply for the loan.
- For anyone who is under 18, you need to get permission from your parents or guardians first.
- You should be a US resident and you need to be a permanent resident of that country.