Many of us are feeling the pinch when it comes to the cost of living and struggling to make your cash stretch further can become an issue if you’re faced with an emergency expense. Whether that’s medical bills or urgent repairs to your home, not being able to pay for them can be stressful. This is why payday loans are popular – they offer additional funds quickly, even if you have bad credit. Whilst there are advantages and disadvantages with this type of loan, there are also specific criteria that you will have to meet before you can be approved. Read on to find out more.
To qualify for a payday loan, borrowers typically need to meet certain criteria. These include:
- Age: Most payday loan lenders require borrowers to be at least 18 years of age or older.
- Employment: Many lenders require borrowers to have a steady source of income, whether it be from a full-time job or government benefits.
- Residence: Lenders also typically require borrowers to be residents of the state in which they are applying for the loan.
- Credit score: Some lenders may check the borrower’s credit score, but typically, payday loans are not based on credit score. Some lenders may also require that the borrower has no outstanding payday loans.
In addition to meeting the above criteria, borrowers will also need to provide certain documentation throughout the application process so that the lender can set out terms and conditions, as well as interest rates. These may include:
- Proof of income: This can include a pay stub, bank statement, or government benefits
- Identification: Lenders will typically require a government-issued ID, such as a driver’s license or passport.
- Bank account: Many payday loan lenders require borrowers to have an active checking or savings account to apply.
Loan amount and repayment
The amount that you can borrow from a payday loan lender will vary depending on the lender and state laws. Some states have caps on the amount that can be borrowed, while others do not. In general, payday loans range from $100 to $1,000. Repayment of the payday loan is usually due on the borrower’s next payday; however, some lenders offer longer terms, up to 45 days. It is important to read the terms and conditions of the loan carefully before signing the loan agreement.
Interest and fees
Payday loans typically come with high-interest rates and fees. The annual percentage rate (APR) for a payday loan can be as high as 400% or more. Additionally, some lenders may charge origination fees, application fees, or late fees if the loan is not repaid on time. It is important to be aware of these costs before applying for a payday loan and to compare the rates and fees of different lenders.
Payday loans can be a quick and easy solution to a cash crunch, but they are not always the best option. Before applying for a payday loan, consider other alternatives such as borrowing money from your friends or family, applying for a personal loan, seeing if you would be able to benefit from and be approved for a credit card, or see if you can seek help from the council or government schemes.