What Is a Payday Loan?
A payday loan is a type of short-term borrowing where a lender will extend high interest credit based on a borrower’s income and credit profile. A payday loan’s principal is typically a portion of a borrower’s next paycheck. These loans charge high-interest rates for short-term immediate credit. These loans are also called cash advance loans or check advance loans.
Key Takeaways:
- Payday loans are short-term, often very high-interest loans available to consumers.
- Payday loans are typically based on how much a borrower earns; a borrower usually has to provide a paystub when applying for the loan.
- A number of laws have been put in place over the years to regulate the high fees and interest rates.
Understanding Payday Loans
Payday loans charge borrowers high levels of interest and do not require any collateral, making them a type of unsecured personal loan. These loans may be considered predatory loans as they have a reputation for extremely high interest and hidden provisions that charge borrowers added fees. If you’re considering a payday loan, you may want to first take a look at safer personal loan alternatives.
Obtaining a Payday Loan
Payday loan providers are typically small credit merchants with physical locations that allow onsite credit applications and approval. Some payday loan services may also be available through online lenders.
To complete a payday loan application, a borrower must provide paystubs from their employer showing their current levels of income. Payday lenders often base their loan principal on a percentage of the borrower’s predicted short-term income. Many also use a borrower’s wages as collateral. Other factors influencing the loan terms include a borrower’s credit score and credit history, which is obtained from a hard credit pull at the time of application.
Payday Loan Interest
Payday lenders charge borrowers extremely high levels of interest that can range up to 500% in annual percentage yield (APR). Most states have usury laws that limit interest charges to less than approximately 35%; however, payday lenders fall under exemptions that allow for their high interest. Since these loans qualify for many state lending loopholes, borrowers should beware. Regulations on these loans are governed by the individual states, with some states even outlawing payday loans of any kind.
Anyone can find themselves in a tough spot and short on cash at times, and if you’re not sure where to turn Personal Money Network can connect you to a lender of online payday loans organizations.
Payday loans are more or less exactly what they sound like – short term loans until your next payday. Loan terms can vary from two weeks or possibly the borrower’s next payday, as determined from lender to lender. Some lenders can offer repayment plans of 30 to 45 days. However, should this not be sufficient, installment loans with longer repayment terms are also available through some of the lenders that Personal Money Network works with.
Online payday loans that advertise no credit checks can be misleading and may be used by some companies trying to gain your business. If you are looking for no credit check loans or bad credit loans, give us an opportunity to connect you to a lender that may be able to help. A number of our customers could have a poor credit history, though some may be approved for payday loan depending on their credit situation. There is no such thing as no credit check or guarantees when it comes to payday loans, although you may have read it elsewhere. We work with many lenders, which can improve your odds of receiving a decision.
When you need money now like $300 or $500, people with bad credit can use payday loans to help make ends meet.
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