by Shevi Goodman ·
Modified on 4 March, 2022
A payday lender provides short-term, high-interest loans to consumers to provide a helping hand during difficult financial times.
Payday loans differ in how large they are, their interest rates, and how long a consumer will be given to pay them back.
Key Points:
- A payday lender provides high-interest, short-term loans to tide you over if you can’t quite make ends meet.
- There are around 23,000 online payday lenders and storefronts in the US.
- Payday loans are an expensive means of financing, with APR of around 400%.
- Payday loans range from $100 to as much as $35,000.
- Terms of loans differ from state to state, with some states – such as California – capping how much you can borrow. Other states limit the interest that can be charged.
Should My Lender Be Regulated?
Yes, your lender absolutely should be regulated! Being regulated means that they must work in accordance to federal and state regulations, which are in place to protect you. For instance, it means that they can only apply the state-authorized levels of interest.
Therefore, you should check that they are regulated online by checking that your lender is a member of the OLA or regulated by the SEC. You can always cross-check their details on the OLA website or SEC register which will confirm their status and therefore whether they are trustworthy.
Why May I Need A Payday Loan?
Payday loans are typically used to help consumers when they are hit with unforeseen costs which they otherwise can not afford to cover. Such reasons may include covering medical bills, plumbing repairs, or paying to fix a broken vehicle.
A payday loan may be more preferable than a different loan due to how quickly you can secure them. When applying for a payday loan, if you meet the eligibility criteria and are deemed acceptable, then you could receive your payout as quickly as 24 hours after submitting your application.
How Much Can I Borrow?
Payday loans range from amounts, whether you are looking to borrow $100 to as much as $35,000. The amount you will want to borrow will depend on what costs you need to cover. The amount you are able to borrow will depend upon your personal financial history and the legislation within your state.
Different states have different regulations. Some states such as New York and New Jersey have banned payday loans altogether. Some states offer unlimited loans, namely Texas. Meanwhile, many states such have limits on how much you are allowed to borrow, for instance California who allow you to borrow up to $300.
Your financial history will also contribute to whether you are able to secure a loan or not. If you have a strong credit history which demonstrates you are reliable in paying off debt, then lenders will favour your application. If you have a rocky history of outstanding debts and financial trouble, you are deemed less attractive to them.
What Happens If I Don’t Payback My Loan?
If you fail to pay back your loan, you could be faced with severe consequences. These could include:
- Threatened legal action
- Further fees (making borrowing these already expensive loans even more expensive!)
- Damage to your credit history, preventing you from securing future loans
- In extreme cases, it is possible to have assets seized if they have been stated as collateral in your contract, although this is unlikely.
The above possible consequences show why you should have a repayment plan in mind before agreeing to the loan. If you know you will find it challenging to pay your loan back, it may be more suitable to seek another type of loan, such as from friends or family.
Am I Eligible For A Loan?
If your state offers loans, there are a few simple requirements to meet if you want to claim a loan.
You must:
- Be at least 18 years of age
- Be an American citizen
- Have a minimum monthly income of $800 (sometimes this is as little as $500)
- Have a current account for us to deposit your funds into
Beyond these requirements, it mostly comes down to your credit history. As different lenders will be more lenient than others, don’t feel dejected if one application gets rejected. If you apply for a loan through Dime Alley, we work with many lenders. This allows us to find the right loan for you.
How Can I Ensure That I Payback My Payday Loan?
You could create a personal budget to ensure that you account for living costs, while putting aside money to pay off loans. There are many ways to budget, such as by using a budgeting app.
There are more and more budgeting apps available to download to your phone or tablet, such as Mint and Honeydue. They range from basic to complex, and from free to expensive. These allow you to track and categorise spending, making it easy to spot overspending.
These applications can also remind you to pay your bills and debt to make sure you don’t forget, and you can also set up standing orders to a savings account so that you can save consistently without too much thought.
If you are not keen on apps, you can set up a budget manually, accounting for you income and outgoings.[/vc_column_text][/vc_column][/vc_row]