Applying for credit can be a stressful process especially if you are not familiar with the ins and outs of how financial products work. If you want the answer to a simple question about taking out a payday loan you will be able to find it here, in our FAQs about payday loans.
The article sets out a list of the most frequently asked questions relating to payday loans and you can either read through all of the answers or go directly to the section that is most relevant.
Basic FAQs about payday loans
Ethical loan companies also follow the best practice recommended by the Consumer Financial Protection Bureau. This requires responsible lenders to ensure that borrowers do not take out a loan if they are unable to afford the repayment.
If you choose to visit the store the application will take around 15 minutes and you will walk out with the cash. Using an online application takes a few minutes and you have the advantages of convenience and anonymity.
Online lenders are open at all hours and you can complete the application in the comfort of your own home. Additionally, no one you know will ever see you applying for the loan so confidentiality is guaranteed.
Depending on the payday loan regulations which apply in your home state, you may be able to apply for a loan if your income is a social security payment or disability benefit. Borrowers who are employed will need to produce their last paycheck.
All store applicants also need to bring a bank statement proving that they have a functioning checking account and a personal check made out for the loan amount plus the fee. The lender retains the check until repayment is due.
Online applications are slightly different but still require proof of identity and income. Documents can be uploaded and forwarded to the lender and no personal check is required. The funds are forwarded directly into the checking account.
The eligibility criteria for taking out a payday loan is fairly standard between all lenders but some may require more proof than others so you need to check out your chosen lender for more details.
This is a tricky question and depends upon where you live. Because the regulations for payday loans in the US are so complicated, if you want to be certain about the legality of the loan, you are going to be restricted to lenders which are licensed to operate in your home state.
Lenders who have stores also have staff who are trained to provide information and advice about loans. So, if you are unsure about where to go for help, a local lender might be the best place to start. Local lenders must be licensed by the state authorities and must abide by the state and federal laws for payday loans.
There are also hundreds of online lenders offering loans to anyone, anywhere. But, many of these are rackets or are operating illegally. Of course, not all online lenders are scams and many are legitimate businesses but if you are unsure about using a particular online lender there are a number of precautions you can take.
Firstly, make sure that the website is legitimate by checking the reviews from previous customers, the address which should always have the prefix ‘https’ and also look for the small padlock icon which means that it is a secure site. Responsible and legitimate lenders will advertise the loans with an APR and most of the large lenders have a live chat function or a customer relations helpline.
The large lenders will also provide a series of FAQs and will fully disclose the terms and conditions of the loan in simple straightforward language. Remember that the interest rate is not always the most important factor when applying for an online loan. It is also important to make sure that you are fully aware of the fees and charges that apply both for loans paid back on time and those that are not.
In some states there is a limit to the number of loans you can take out in a year whilst in others you can have one every month as long as you repay the loans in full and on time. The important point to take from this advice is that a payday loan should not be the first choice as a means of coping with everyday bills.
In certain circumstances, such as times when an unexpected emergency lands you with a bill that you have not budgeted for, a payday loan can be useful. But, they should not be used to top up your regular income.
Lenders hold all personal information collected from applicants in strict confidence so you can be certain that your details will not be shared with other companies. However, some brokers do pass round the details of applicants so be sure to apply only to a direct payday lender.
It is also worth bearing in mind that a no credit check lender might offer payday loans at a higher rate of interest than a lender that does ask for the check. The bottom line is that a poor credit rating makes the risk of default higher so the lender will charge more to offset that risk.
If your application is rejected it may be because you do not have the necessary documentation or it may be that the lender is acting responsibly and does not feel that a short term high interest loan will actually help your financial situation. If you are already in debt and the lender thinks that another loan will only add to your problems they may refuse the application.
Any lender which advertises loans in a state where they are prohibited should be avoided. Some are scam artists and some are lenders who are using a loophole to get around state legislation. Using illegal loans can result in serious debt.
Along with the Center For Responsible Lending, the CFSA has been instrumental in helping to highlight bad lending practices and worked with state legislators to promote the capping of interest rates and fees for payday loans.
Questions About Applying For A Payday Loan
Making an application online is also simple and you can do this from your home. But, you should be aware that using a financial loan website carries a slightly higher risk than using a store unless you can be certain that the lender is licensed. Some states do not allow online payday lenders so it may be a matter of what kind of business is available in your home state.
Lenders may be restricted to charging a one off fee for a bounced payment but in some cases there are no limits. Each time the lender attempts to withdraw the funds, the costs from the lender and the bank can soon reach high amounts. If you are taking out a payday loan it is most important to make sure that when the due date arrives, there are sufficient funds in your checking account to make the payment.
Online lenders will review the application and as soon as it is approved the funds will be sent to your checking account. This will usually take a couple of hours. Or, if the application is made after banking hours you will get the funds the next day.
Questions About Repaying The Loan
To make repayment to an online lender you will be asked to sign an authorization form when you take out the loan. This allows the lender to withdraw the loan amount plus interest when it becomes due.
The frequently asked questions listed here cover most of the basic information and queries about payday loans. Some of the questions can only be answered by looking at the regulations for payday loans in your home state and you can find a link to each state on the website. If you want to know more details about any of the topics you can look through the range of in depth articles in this series about US online credit.