Payday Loans Online And How To Apply

A woman applies online for a payday loan on her smartphone
Best Deals On Payday Loans
Part 1 How To Identify Safe Payday Loans
Part 2 Payday Loans Online And How To Apply
Part 3 The Best Payday Loan Company For You
Part 4 Getting Financial Help Without A Payday Loan

Check cashing loans have been around for a very long time but it was not until 1996 that this kind of business was legalized by the Senate. Before the advent of the Internet, the only available outlet for check cashing was a local business that operated from a store. In this article we look at:

  • Storefront payday lenders
  • Online payday loans
  • Qualifying for a payday loan
  • The cost of taking out a payday loan

Storefront lenders for payday loans

Using storefront lenders involved paying a personal visit to the store and sometimes it could prove embarrassing if you met someone you knew. At the store you would write a post dated check for the sum of money you wanted to borrow and include the amount of interest that was being demanded. When payday arrived the lender would present the check to your bank for repayment of the loan.

Payday loans are typically short term for between 14 days and 30 days

Many of these businesses operate under a patchwork of names including cash advances, deferred deposits or credit access. Loans of this kind are typically for between 14 days and 30 days. Depending upon which state you live in the sum that can be borrowed will vary. The lowest amount that can be borrowed is in California and Montana and this is $300. In Delaware, Idaho and Illinois you can borrow up to $1,000. Find out more about what regulations apply in your home state.

Online payday loans

The number of people who have access to the Internet has expanded exponentially and now you can get a payday loan through many online lenders. Additionally, the Internet has seen this kind of business flourish and the ease with which you can apply for and be accepted for a payday loan online means that it is a more convenient and simple process.

Used correctly and with full knowledge of the costs, a payday loan is no more dangerous than any other form of borrowing.

From the comfort of your home you can fill in the necessary forms and once accepted the cash will go directly into your checking account. But, online loans are often no cheaper than those given out by stores and interest rates for all payday loans are very high. The good news is that with more online lenders opening for business the competition for customers may force down interest rates.

Qualifying for a payday loan

In order to qualify for a payday loan you must produce proof of your identity, proof of your income and you must have a functioning checking account. Lenders do not ask for a perfect credit score or credit record but a lender will check a database that records any outstanding loans, bankruptcy or if any court has awarded a judgment against your pay. If you do not earn enough you can be rejected. Lenders apply a lower wage limit which might be $500 per month but could be higher. You may also be rejected simply because the state imposes restrictions on the percentage you can borrow against your pay.

A man is shown applying for a payday loan online on his laptop

Anyone who is active in the military cannot have a payday loan unless the interest rate is restricted to 36% APR. And, if you already have a loan, have been declared bankrupt, have not been at your job for long enough or have only recently opened your bank account, you may also be refused a loan. Each lender may also impose their own restrictions regarding your payday loan history, how much you earn and your normal expenses.

The costs of a payday loan

The total cost of a payday loan will vary depending upon a number of factors including where you live. It has been calculated that the average cost for a 14 day loan will be around $23.53 for each $100 borrowed. This figure does not include renewal costs or non payment costs.

There will be no impact on a credit score if you take out a payday loan unless you do not pay it back. Unless the lender is really sure that there is no chance of repayment they will be unlikely to report the loan to the credit bureaus.

The cost of payday loans depends upon many factors including where you live

If you are unable to make the repayments you could find that the lender sells on the debt to a collection agency or you may find yourself the subject of a series of harassment calls and letters. If the debt has been sold on and the collection agency does not get a response, they may take out a civil action that could result in a court judgment. So, the costs of a payday loan do not always involve just money but can cause mental anguish and a court judgment that remains on file for seven years.

Are payday loans dangerous?

Used correctly and with full knowledge of the costs, a payday is no more dangerous than any other form of borrowing. What you have to remember is that you are basically getting a portion of your next paycheck in advance. So, if you plan carefully and are sure that you can pay off the loan when you receive your pay and not be short of funds for the following month, a payday loan can help you out of a financial hole.

As long as you are aware of the pitfalls that include high rates of interest and possible extra charges, a payday loan can be a useful financial tool in an emergency. If there is absolutely no alternative way to borrow money, you can use a payday loan as long as you understand the consequences should you not be able to make the repayment on time.

Best Deals On Payday Loans
Part 1 How To Identify Safe Payday Loans
Part 2 Payday Loans Online And How To Apply
Part 3 The Best Payday Loan Company For You
Part 4 Getting Financial Help Without A Payday Loan

About the author

David Warren

David Warren is an expert on personal loans across the United States. His career in banking has helped make David the loans specialist that he is today. He shares his analysis and insight into the personal finance industry on onlinecreditusa.com