Traditionally, a payday loan, also known as a cash advance, paycheck advance or payday advance, was a loan that was repaid on or before the borrower’s next payday. Today, repayment of a payday loan may not always be directly tied to a borrower’s actual payday.
Payday loans are usually for shorter duration, insecure and relatively smaller in amount.
How to get a payday loan
To get the loan, you fill out an application and give the company a check for the amount of the loan, plus the fee that they charge. On the assigned payment day, the company will cash your check and your loan will be paid off.
You can get a payday loan either by contacting the lender directly or applying for the loan online. [click here to learn about payday loan online]
In order to apply, and secure, a payday loan, you have to meet the following conditions:
- You are at least 18 years old
- You’ve been employed for at least one month
- You have an active checking account
- You are a U.S. citizen/permanent resident
- You have an active email address
- You have a driver’s license
Payday loan and your Credit Score:
Borrowers with low credit score may have difficulty in obtaining a payday loan. Here is how your credit score makes your qualification easy, or hard, for a payday loan.
- 700 and Above – Very good to excellent. Lenders will have no problems giving you a loan with a credit score of 700 or above.
- 680 to 699 – This credit score puts you in the “Good / Fair” category.
- 620 to 679 – If your credit score falls into this range, you fall into the “Okay” category. 620 is considered to be a “par” credit rating.
- 580 to 619 – While you aren’t in the “Bad” category yet, you are teetering on the edge.
- 500 to 580– You can still get credit in this scoring range. More information may be required.
- 499 and below – Yes, even with as score of 499 or below you can still be extended credit. More information may be required.
How much can you get as a payday loan?
A payday loan is generally a small loan, usually $300 to $1000, which you pay off at your next payday, which is normally two weeks or a month after you take out the loan.
Lenders will consider your basic recurring expenses and then probably limit the loan to a percentage of your monthly or weekly income. For example, if your paycheck is generally $1000 every two weeks, the lender may cap the amount you can borrow at $500.
This may not sound like a lot, but bear in mind that if you borrow $500 you have to pay it back in two weeks alongside the loan fees.
This might result in you being short of money for the following two weeks, which may prompt you to consider taking out another loan.
Is payday loan for you?
Despite being short term commitment and for amounts usually no more than $1,000, payday loans are still an important endeavor that cannot be taken lightly.
Before taking a loan, it is important to honestly assess your current situation and determine whether a payday loan is right for you, because failing to meet the obligation can be expensive and will damage your credit rating.
Are you already in debt and just looking to prolong the inevitable? Are you in stable employment with a wage that can cover the loan on the next pay day? Does borrowing from friends or family, or using a credit card make more sense? These are all questions you will need to consider.
If you aren’t trying to cycle debt and you do have a stable wage, then a payday loan could be the perfect solution. Especially if you don’t have credit cards and do not wish to burden friends and family.