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Get the Facts First: What You Need to Know About Payday Loans

When it comes to getting the cash that you need during a financial emergency, payday loans are a viable option for quick results. But before you decide whether or not to get a payday loan it’s best to familiarize yourself with the facts surrounding this type of cash advance loan. Keep reading for some frequently asked questions about payday loans that will help you decide if getting one is the right move for you to make.

A payday loan is a short term loan for workers who can prove a steady income (meaning they can prove that they will have a paycheck to repay the payday loan with).  

What is a payday loan?

A payday loan is a short term loan for workers who can prove a steady income (meaning they can prove that they will have a paycheck to repay the payday loan with). Payday loans are fast ways for consumers to get cash advances on their next paycheck in order to use for financial emergencies. Payday loans typically have higher interest rates than other types of cash advance loans. However, payday loans do not require credit checks, making them a viable solution for those who do not have great credit and cannot get funds otherwise.

How do payday loans work?

When a borrower gets a payday loan, he or she writes a post-dated personal check to the payday lender for the total amount to be borrowed plus the finance fee. The payday lender will then advance the amount of the loan to the borrower under a short term loan limit for the borrower to use. Payday lenders do not cash the personal checks, but hold off until the end of the long term (the pay day) when the loan is due in full.

If the borrower pays back the full amount of the loan plus all finance charges and other fees, then the transaction is over. If the borrower fails to pay back everything that is owed, then additional charges will be applied. The borrower will usually have the option of paying the finance charge at the end of the loan period to roll over the loan for another short term.

Are there limits for payday loans?

Yes, payday loans do have limits such as loan term limits and limits to the amount. These requirements are actually dependent on the particular laws of the state in which the loan is contracted in. You may be eligible to get any amount up to 1,000 dollars or more. Checking the loan limitations for your particular state before you connect with a payday lender is the best way to find out how much you can borrow.

Loan limits also may vary from state to state. A typical payday loan term is approximately fourteen days (the usually amount of time from one paycheck to the next). It is possible to get shorter payday loans than two weeks. The most important thing to remember about payday loan term limits is that going over your initial limit is a no-no. A payday loan should be looked at as a short term loan used for emergencies and every effort should be made to pay it back in full in the original allotted time.

Am I eligible to get a payday loan?

Not everyone is eligible to receive a payday loan. Some states prohibit payday loans completely. However, if you have an active bank account in good standing, personal identification, and proof of a steady income source, then you are probably going to qualify for a payday loan. As stated above, having a good credit score is not necessary to qualify for a payday loan as lenders do not require a credit check.

Where can I get a payday loan?

Certain states have limitations that control who can become a payday lender. But in most states in which payday loans are not prohibited, payday loans can be granted by pawn shops, check chasing stores and payday loan stores. Internet payday loans are becoming increasingly popular as convenient alternatives to brick and mortar sources for payday loans. Borrowers can apply for internet payday loans easily online and have the funds directly deposited to their bank account.

Are there risks to payday loans?

There are risks to almost every type of loan including payday loans. Payday loans can be much more expensive than some other types of cash advance loans. And borrowers who continuously roll over unpaid loans to the next pay cycle can end up spending significantly more than the original loan amount.

However, if you are facing a financial emergency – a medical emergency, unexpected home or automobile repairs, to the sudden loss of employment for a spouse or housemate – then a payday loan can be just what is needed to help you get back on track again. And since payday loans don’t require good or even decent credit or credit history at all, they are a great option for those who can’t qualify for harder to get cash advance loans.