Payday and Short Term Loans
Payday loans are a popular way for low-income Americans to get the cash they need to pay overdue bills or to cover surprise expenses. Attractive because of the ease with which they are extended – there is no credit check requirement and the funds can become available very quickly – payday loans can help you get out of a short-term problem.
There are generally two major thoughts about payday loans. One is that they are convenient solutions to short-term financial difficulties. The other is that they are dangerous and sneaky financial traps. What’s the truth? How do you know if a payday loan is right for you?
Here are some of the most frequently asked questions about payday loans.
How many loans can I obtain?
As with all financial industries, payday loans are carefully regulated at both a federal and a state level. The specific details about how much you can get, how often you can get it, and how quickly you need to repay the debt will vary drastically by state.
What determines my eligibility for a loan?
Individual lenders can use different factors to evaluate your creditworthiness, but there is no requirement obligating a lender to check your official credit scores. Most of the time, eligibility is determined using a formula created by the specific lender. That could include an examination of your bank statements or verification of your employment history.
Is applying for a payday loan difficult?
Most of the time, applicants can finish the process within fifteen minutes. It can happen so quickly primarily because you rarely need more than a paystub, your checking account information, and a government-issued ID to apply.
Approved applicants usually have two options for receiving the funds. They can be provided immediately as cash or they can be wired to your personal bank account. Often, the payments will be automatically debited from that same account.
Are there any other repayment options?
Usually, there are multiple options. Nowadays, the most common method is to use automatic debit, however some companies will still allow you to write a postdated check. A postdated check is one dated for some time in the future. It will not be passable at a bank until the date listed on the face of the check, assuring that the payday loan company doesn’t present it before payment is due, but it is written out for the entire sum due, guaranteeing the company some way to retrieve the money owed to them.
You may also be able to pay at the branch where you applied for your loan.
How much can I get?
As stated earlier, the loan limits are determined legally at the state level. That means you are restricted to a maximum of whatever limit is established by your state. In some places, you may not borrow more than $500. In others, there is no legal limit to the amount you can borrow. If you live in such a state, be careful not to overcommit yourself.
When will I know if I’m approved?
Almost immediately. Loans at banks and credit unions require underwriters who use complex mathematics to evaluate your lendability. Payday loan companies aren’t hampered down by underwriters, so they can often approve or deny you within minutes. Once approved, the only step standing between you and a fistful of cash is an explanation of the fees, terms, and conditions, which any reputable company ought to lay out before you leave.
Are there penalties for paying off my loan early?
Most of the time, you will be permitted to pay off your loan early without penalty, but this is a question that can only be answered by a loan officer at the specific company at which you receive your loan. Questions like this are good examples of why you should pay attention when the lender explains fees and conditions.
Is a payday loan right for me?
In the end, only you can determine whether or not a payday loan is an appropriate solution to your financial problems. If you can qualify and will have enough money to repay the debt quickly, it can be an answer to your prayers. If you are unlikely to be able to repay the debt within a few days or weeks, you’ll pay so much in fees that the loan probably doesn’t make any sense.
You’ll need to evaluate your financial situation carefully to make the right choice.