A payday loan is a short term loan that is extremely easy to obtain. Qualifying for a payday loan is much easier as compared to traditional loans. There are minimum eligibility requirements for a pay day loan and in most cases individuals do not have to submit any document to obtain the loan. It is the ideal option for individuals to overcome mid month cash crunches and shortfall before the payday.
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Payday loans first appeared in the US in the early 1990s.
Today these loans have become extremely popular among US consumers. According to industry estimates payday lenders advance more than $38.5 billion to individuals in the US every year. These loans are used by more than 10 million Americans to take care of their cash shortfall.
Tough payday loans are utilized by millions of people in the US annually; there still some misconceptions about these loans. Below we have compiled comprehensive information on payday loans that will help anyone considering of availing these loans to make a wise financial decision.
A payday loan is simply a short term cash or check advance, usually of $500 or less, that is due within the next payday. These loans are typically offered by independent payday loan lending companies. The lending companies have to comply with federal and state regulations regarding these kinds of loans.
Payday loans are different than traditional loans. There are three unique features of payday loans that differentiate these loans from other kinds of loans.
- Payday loans are for smaller amounts
- Payday loans are generally due on the next payday
- Payday loans are repaid through an advance check or giving access to the lender to your checking account
Other ways payday loans are different from traditional loans is that they are typically paid in one lump sum amount. Moreover, rollovers or renewals are allowed with this kind of loans in which the individual can request the lending company to extend due date of the loan amount.
Payday loan lenders may charge fees for availing payday loans that generally range from $10 to $30 for every $100. The fees vary from lender to lender and depend on the maximum amount allowed in the state. The Annual Percentage Rate (APR) on a loan with $15 per $100 fee is equivalent to about 400%. This means that individuals that want to borrow $800 payday loans have to pay about $920.
Note that the fees and charges may be subject to a maximum cap. Most states do not put a cap on fees that can be charged by payday loan lenders. The figure below gives a glimpse of the payday loan regulations in various states in the US.
Individuals that opt to roll over or renew payday loans have to pay additional fees. Moreover, depending on the state law some payday loan lender charge late fees for not paying the loan amount on time. There might be other fees attaches with payday loans. For instance if the individuals' loan amount is loaded onto a prepaid debit card, they might have to pay additional fees for calling customer service, checking the account, and also each usage of the card. That's why it is important to read the fine print of the loan agreement to ensure that these fees don't come as a surprise when utilizing the loans.
Similar to any other loans there are certain eligibility requirements for payday loans. Generally the requirements are minimal as compared to applying for traditional loans. The exact requirements differ from lender to lender. Below is the checklist that gives an idea on the requirements that individuals must fulfil for applying for payday loans.
- Age 18 years or older
- A steady job with regular income of about $350 a week
- Income from benefits should be less than half of the salary
- Receive income in the bank account either monthly, weekly, or daily
- In case of a bad credit score, you need to provide evidence about reliable and stable financial situation
Meeting the above mentioned eligibility criteria does not guarantee approval of the payday loan, but it does increase the chances of obtaining the loan. In most cases, individuals that fulfil the eligibility requirements of payday loans receive the loan amount within 48 - 72 hours of making the application. This proves as invaluable to individuals in meeting their cash shortfall during the middle or end of the month.
The best way to apply for payday loans is online. Following simple steps are required in making application of payday loans online.
- Step 1: Complete online application for payday loan.
- Step 2: Wait for the application to get approved.
- Step 3: Receive loan amount in your bank account.
Although individuals can apply for payday loans through a storefront, but applying for payday loans online offers maximum convenience to the individuals. With just a few clicks of a mouse button, individuals can receive the much needed loan amount in their bank accounts. There is no need to hit the gas pedal and go to a storefront to obtain the amount. The ease and convenience of applying for payday loans is one of the reasons for immense popularity of these loans.
Payday loans in the US offer lots of benefits to the users. The benefits of payday loans are more than the risks attached to these loans. These loans are usually the best solution for individuals that have low or moderate income and have little liquid assets. All the payday loan providers have to comply with state and federal rules and regulations. In case of any complaint or harassment by the payday loan lenders, individuals can contact Consume Financial Professional Bureau (CFPB) or the office of attorney general in the state where the loan application is made.
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