At least 32 states in the US have legalized payday loans.
Therefore, before deciding to take out a payday loan, you should first consider your location.
However, your current location is not the only thing you should check in order to score the best payday loans.
When in a financial fix, you should contemplate the following before resorting to payday loans:
What to look out for
After establishing that the state laws allow for payday loans, proceed to examine the requirements of individual lending agencies.
These prerequisites vary from being 18 years of age, having a social security number to having a valid ID.
However, some lenders are stricter requiring you to have a minimum monthly income of $1000 after-tax.
To avoid rejected loan applications, try to pick a lender whose terms you can qualify for.
Repayment terms and fees
Before you get indebted to a lender, ensure you are well informed about all the fees you will be required to pay.
Dig deep as much as you can to understand any hidden charges.
Understand how the annual percentage rate (APR) is calculated and how it affects the total amount you will be required to pay at the end of the loan term.
There are two ways to acquire payday loans. You can either do a convenient online application or an in-person application.
For online application, you will need an active email address to handle important communication and an active checking account.
Retail payday loans are the best payday loans because you can easily verify the people you are dealing with, but this shouldn’t stop you from taking out an online loan when you are pressed for time – Just do your due diligence to ensure you’re dealing with a reputable online lender.
The very essence of the best payday loans is getting you out of a financial emergency fast.
Therefore, approval time becomes critical.
A faster approval rate is very convenient as it gives you a much-needed quick fix in a short time.
In the same vein, quick access to your funds once you’ve been approved is a benefit you’ll want to look for.
Some lenders take as little as 2-3 business days to deposit funds into your account, while others may take longer.
How else can you learn about the lender’s reputations if not from past customer reviews and testimonials?
Nevertheless, do not fall for short positive or negative reviews; some of those are fake reviews.
Instead, go for lengthy and detailed reviews, as these can be more revealing.
Check the licenses
Payday loan agencies must be licensed by the authorities.
An unlicensed lender is an outright red flag, and you should not engage them whatsoever.
For cheaper and more secure payday loans, sign up for services by direct lenders.
There is nothing as frustrating as sending out emails and waiting for weeks to get a simple reply or dealing with a bad-mouthed service agent.
Choose a lender who has an incredible record of customer service and reliable whenever you need any information.
Am I eligible for a payday loan?
Money lenders usually have a minimum eligibility criterion that applicants must meet.
Failure to do so will result in rejection of your loan application.
To know if your eligible for a payday loan, consider the following:
Source of income
Payday loan lenders require applicants to have a source of income.
Money flowing into your account implies you are capable of paying back the borrowed amount.
The frequency of the revenue is, however, looked at from different perspectives by different lenders.
Some lenders require their customers to be in stable employment positions.
This means their salaries are flowing in regularly thus there’s no chance of failing to pay back the owed amount.
Some payday lenders also look at where the money you are receiving as income is coming from and how much you are receiving.
The purpose of the former step is for lenders to avoid getting tangled up in illegal transactions.
The latter action is considered necessary as it helps lenders determine how much to give you.
Your credit history is a record of your ability to repay debts.
In other words, it demonstrates responsibility for paying back lenders and managing your finances.
This type of loan is an alternative financing solution for many hence applicants with a bad credit score are usually considered.
However, payday lenders have different restrictions when it comes to this particular criterion.
Each has a degree of bad credit level they are willing to accept.
Knowing your credit score before applying for a payday loan is a wise first step.
You can request a free copy of your credit report from credit reporting agencies.
Examples of such agencies are Experian, Equifax and TransUnion.
An active bank account in your name
When applying for this type of loan, one of the things lenders ask for is a blank check from an account in your name.
The purpose of this step is to confirm your identity and physical address.
When opening a bank account, you are required to provide personal information regarding who you are and where you live.
A payday lender can confirm these details from the blank check you send them.
If the information provided differs, then you might be considered unqualified for the loan.
Aged 18 or above
In most countries, this restriction is usually put in place by the law.
People below this age are not considered to be old enough to make decisions they can legally be held accountable for.
In addition to that, most countries give national identification cards to their citizens once they are eighteen years old.
A copy of the identity card is a requirement when applying for payday loans so you cannot apply for one if you are a minor.
Payday lenders are usually found online hence applications are made on their sites.
It means you have to send copies of all the required documents in softcopy form.
It is easy for them to confirm the validity of the submitted documents.
If any of them is not legit, your application may be rejected.
Getting payday loans from the same lender in future will also be hard as they already consider you to be untrustworthy.
No outstanding payday loan
Lenders will reject your payday loan application if you have any outstanding loans.
Owing someone money and borrowing from another person indicates you are incapable of paying back.
A lender will only approve an application if they are sure you will pay the principal and interest.
To avoid being considered unqualified due to this reason, clear any outstanding loans.
Doing so will also improve your credit score, improving the chances of your loan application approval.
Important facts to know about payday loans
Payday loans are meant to help you meet your daily expenses for a short period.
This period lasts until you get your next paycheck, meaning it is a short loan.
Lenders expect to be paid back as soon as your salary, or any other form of income is deposited into your account.
The loan will, therefore, last you about two or three weeks.
Payday loan lenders do not ask for collateral from their applicants. Their requirements are very few.
This makes the business a risky venture for them since payday loans attract a significant percentage of people with bad credit scores.
To equate the riskiness to the returns, lenders usually charge a high-interest rate.
The rate is considered to be high because it is much more than what banks and other financial institutions charge.
Applications can be made online
You do not need to walk into a physical building or office to apply for a payday loan.
Many payday lenders are now found online.
All you need is a computer and the internet.
This also means you do not have to waste time while queueing to submit your application.
In addition to that, you can apply for a payday loan at any time, be it night or day.
Loans usually have a payment plan. That is, you pay back a certain amount at specific intervals until the entire loan is cleared.
Payday loans, however, do not work this way. Payment is made once.
This is inclusive of the principal amount and interest.
Before applying for this type of loan, be sure you will be able to pay the entire amount in one installment.
The amount given is limited
This type of loan is not meant for investment purposes but rather to help you meet daily needs.
It should also be paid back in a few weeks. The amount given is, therefore, not significant.
The maximum amount you can get is five hundred dollars.
Lenders, however, give between two hundred and three hundred dollars.
When determining how much to give you, these lenders look at many factors.
Some of them include how much your income is and what your credit score is.
If your salary is high and your credit score is impressive, then you are more likely to get a big loan.
Getting the best payday loans is as simple as making enough time to do thorough background checks on different payday lenders.
With enough research, you are assured of saving money by avoiding predatory lending agencies.
Disclaimer: This is not legal or financial advice. Please consult a legal or financial advisor for your specific situation.