by Ben Sweiry ·
Modified on 19 October, 2023
A payday loan is a short-term, small loan that you repay once you receive your next paycheck, typically two to four weeks after you take out the loan.
Payday loans tend to have small loan limits, and depending on your state law, payday loans may be available through storefront payday lenders or online.
Key Points:
- A payday loan is a high-interest, short-term loan used when you urgently need money, because you can’t cover your costs.
- Payday loans are most commonly taken out by those aged 18-24, but are used inter-generationally.
- The average loan amount in 2021 was $375 (Source: PewTrusts.org)
- Payday loans are accompanied by steep interest, with an average of 400% APR, making them an expensive means of borrowing.
- They are flexible and can provide you with funds within one day of applying, making them convenient when you find yourself at a loss.
What is a Payday Loan?
Payday loans are for small amounts, and many states set a limit on payday loan size. To borrow $500 is a common loan limit although limits range above and below this amount. With Dime Alley, you can apply for a payday loan for up to $35,000.
The due date is typically two to four weeks from the date the loan was made. The specific due date is set in the payday loan agreement.
A payday loan is usually repaid in a single payment on the borrower’s next payday, or when income is received from another source such as a pension or Social Security.
To repay the loan, you generally provide the lender with authorization to electronically debit the funds from your bank, credit union, or prepaid card account. If you don’t repay the loan on or before the due date, the lender can cash the check or electronically withdraw money from your account.
What Are The Benefits Of a Payday Loan?
Those who submit a form for a payday loan are usually in urgent financial circumstances. When we need cash in an emergency, time can be of the essence. If you’re facing hospital bills, emergency home repairs, or need to fix your car, the fastest and most suitable way may be a payday loan.
An online payday loan is an excellent opportunity to get cash without requiring you to go to relatives or banks. In many cases, they are capable and safe for solving your financial problems as quickly as possible.
Where Can I Apply For a Payday Loan?
You can research what loans are available near you and apply directly to a lender. Alternatively, you could use a loans broker who will connect you to a suitable lender. That is what we do here at Dime Alley. This can be done completely online and there is no charge for submitting an application form.
The process is relatively quick, taking just a few minutes, and requires applicants to provide basic details and information regarding the type of loan you are applying for.
After this part of the process is complete, Dime Alley will locate the best options for you quickly and allows you to see instantly whether your application has been approved.
How Much Money Should I Borrow And How Long For?
Payday loans are available from $100 up to $35,000. It is important to keep in mind that payday loans should only be used for emergency and unforeseen circumstances, designed for one-off payments.
Alternative loans or sources of income should be considered for more significant amounts of money, especially as borrowing excessive amounts of money may make it difficult to make the repayments within the given time.
When deciding on how much money to borrow, always ensure you will be able to afford the repayments and review your income to check you are making the correct decision.
How Long Should I Be Borrowing For?
It is always crucial to take into consideration how long you will need a loan to overcome any financial difficulties. It is always possible to choose the 2-4 week period, allowing you to reach the next payday and then repay any money borrowed in one overall payment.
It is also possible that people may need longer to repay loans, and it is therefore an option to take a loan for up to 5 years and pay it back on a monthly basis in equal instalments (see installment loans). If you take this second option, it is possible to make repayments early and consequently save money on the interest rates.