A payday loan is a high-cost and short-term loan that should be repaid within the next paycheck. In most cases, payday loans start from $300 all up to $1000. Also, you will be required to open a bank account in addition to having a consistent income to get your loan approved.
How Payday Loans Work?
A payday lender will start by confirming your income and carefully checking your account information. And once they’ve done that, the money will be delivered to you in less than 15 minutes at the office, or if the transaction is being done, the money will be credited to your account by the next morning. The lender will then dispatch the cash to your account. This should take at most 24 hours. However, in most cases, the money should hit your account within a few hours. It depends on your lender. Once you have money in your account, you can withdraw it and use it to solve an urgent financial issue. You will be required to repay the loan within the stipulated time.
The Amount You Can Borrow
Depending on your state, you can borrow from as low as $300 all the way to $1000. So, it depends on the laws that govern your state. Do your research before borrowing a payday loan. Determine the amount you need to borrow. Don’t borrow too much cash. It can dent your credit history. Borrow what you can afford to pay back. Also, don’t borrow to finance luxuries. Remember, you will need to repay this amount at the end of the month. It’s also important to note that your lender will approve your requested loan based on your income, credit history, and recent debts. Learn more about installment loans online and apply for yours today!
Qualifications: What You Need to Get Approved For a Payday Loan
The law is clear as far as who qualifies for a payday loan. However, things might be slightly different from one state to another. Here is a breakdown as far as who qualifies for a payday loan is concerned.
- Age: You must be over 18 years of age.
- ID: You must have a valid government-issued ID.
- Bank account: You must have an active bank account. If you don’t have on be, you will need to open one before making a loan application.
- Income: Most lenders will want proof of income. To get proof of income, get a bank statement. You can also rush to your company and request a formal communication proving that you work there.
Why Some People’s Loans Get Rejected?
Your loan application can be approved or rejected. However, being rejected doesn’t mean the end of the game. Understand why your loan was rejected and work on these issues meticulously. Here are common reasons why your loan can be rejected:
If you don’t make good/enough money, your lender might elect to reject your loan application. In most cases, a lender will require you to have at least a net income of $500. Anything below this figure might see your loan application rejected.
Another key reason why your loan can be rejected is failing to meet the explicit repayment requirements. Remember, each state has its own laws governing or limiting the amount you can borrow. In this case, borrowing an excessive amount might see your loan application being rejected. So, it’s wise to familiarize yourself with these laws. Try to determine different algorithm gages used by companies when it comes to assessing your risks.
Do you have any outstanding loans? Well, then your loan might be rejected. Most lenders have contracted companies that track loans in real-time. So, if you have an outstanding credit facility, consider paying it first before applying for another loan.
Active Duty Military
According to federal laws, lenders are not allowed to advance short term loans of 36 percent and above (APR) to the disciplined forces in the military. Of course, some lenders might bend these laws, others might lock you out if you fall in this category.
If you have been declared bankrupt, chances of getting your loan approved are diminished. No bank will want to give a bankrupt individual a loan.
Banks hate bounced checks. They won’t approve a loan from a person with lots of bounced checks.
Employment and Bank Account
If you haven’t been on employment for long enough, your loan might be rejected. Similarly, if your bank account has been dormant, your lender might elect to reject your loan.
Cost of a Payday Loan
Normally, you will be charged around $15 for every $100 you borrow. This translates to a 15 percent interest rate. This means that a 2-week loan can attract a 391 percent APR. It’s also important to note that online lenders charge a higher interest rate—roughly at $23.53 per $100 you borrow. This translates to an APR rate of 613%. Plus, if you don’t repay the loan in full on your first payday loan, you will have to cover a new finance charge. The cycle will repeat until you service your loan. So, repaying your loan in time is key. Plus, failing to repay your loan in time will negatively affect your credit rating.
Importance of APR
With the Annual percentage rate, abbreviated as APR, you have a tool that helps you compare different loans. Thus, you will determine the cost of different loans from different lenders.
Understanding what payday loans are will help you secure the best credit facility out there. It contains all you should know regarding payday loans. From the basics to how to secure the best credit facility out there, this is the information you need to free yourself from those difficult emergencies and achieve better financial freedom.