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Payday loans give borrowers the opportunity to receive money upfront for an emergency or pressing bill. For people who need to borrow $200, $300 or $500 on the same day, funding is often available in 1 to 24 hours. The loan is typically repaid in full on their next payday from work or over a couple of months.
by Daniel Tannenbaum ·
Reviewed by Harry Adair ·
Edited by Sithara R ·
Modified on 18 March, 2024
What is a Payday Loan?
For people who might live paycheck to paycheck or are caught out by an unexpected emergency, a payday loan can be a lifeline to tide them over until they get their next payday from work and get back on their feet.
There are around 12 million Americans that use payday loans each year, with people either choosing to apply online or go to one of the 23,000 stores across the country in popular spots such as California, Texas, Nevada and Florida.
How Much Does a Payday Loan Cost?
Based on an example of a $500 payday loan, this will cost $46.23 in interest if used for two weeks (total repayable $546.23) and $92.27 in interest if used for 4 weeks (total repayable $592.27)
How Do Payday Loans Compare To Other Options and Loan Products?
| Type of Loan | Interest Rate Range | Loan Amounts | Repayment Terms | Bad Credit | Same Day Funding | Collateral Required |
| Payday Loans | 200% to 400% APR | $100 to $2,500 | 1-24 months | Yes | Yes | No |
| Cash Advances | 200% to 400% APR | $100 to $2,500 | 1-24 months | Yes | Yes | No |
| Bad Credit Loans | 200% to 400% APR | $100 to $2,500 | 1-24 months | Yes | Yes | Yes and No |
| Personal Loans | 8.99% to 36% APR | $1,000 to $100,000 | 2-7 years | No | Yes | No |
| Title Loans | 29% to 300% APR | $100 to $50,000 | 15 to 30 days | Yes | 1-2 days | Yes |
| Installment Loans | 8.99% to 36% APR | $100 to $50,000 | 2-7 years | No | Yes | Yes and No |
| Credit Unions | 7.99% to 18% APR | $100 to $2,000 | 1-6 months | Yes | No | No |
| Line of Credit / Catalogue Credit | 25% to 35% APR | Up To $1,000 | Revolving | Yes | Yes | No |
Where Can I Find
Payday Loans Near Me?
The History, Origins and Laws of Payday Loans in America
Whilst products such as ‘salary lenders’ have existed since the early 1900s, this became widely abused by people charging high rates of interest.
Today, payday loans are a heavily regulated industry by The Consumer Financial Protection Bureau and they are legal in 37 US states. In states that they are not permitted, a maximum price cap exists of 36%.
Whilst many run independently, some US lenders have had a tendency to partner with Native American tribes in circumvent consumer protection laws. For those looking to borrow in states where payday lending is illegal, some lenders are using Rent-a-Bank schemes in order to facilitate loans.
However, there are a number of smart and sophisticated practices in place to protect consumers such as:
- All lenders must clearly disclose the cost and APR of their loans beforehand
- There is a limit to how many loans you can have open in each state (usually just 1 or 2)
- Customers are protected by the Fair Debt Collection Practices Act and will be treated fairly when missing repayment
What Are The Terms For Payday Loans in Each US State?
| State | Loan Amount | Loan Term |
| Alabama | $100-$500 | 10-31 days |
| California | Up to $300 | Up to 1 month |
| Colorado | Up to $500 | Up to 6 months |
| Illinois | Up to $1000 or 25% of gross monthly income | 13-120 days |
| Indiana | $50-$550 | At least 14 days |
| Iowa | Up to $500 | Up to 1 month |
| Kentucky | Up to $500 | 14-60 days |
| Louisiana | Up to $350 | Up to 1 month |
| New Hampshire | Up to $500 | 7-30 days |
| Ohio | Up to $1000 |
3 months – 1 year
|
| South Carolina | Up to $550 | Up to 1 month |
| Tennessee | Up to $500 | Up to 1 month |
| Texas | Unlimited | 7-180 days |
What Is The Eligibility Criteria For Payday Loans?
Income
Most lenders require you to have a minimum monthly income of $500 or $800 per month, which can be earned either full-time, part-time or as someone self-employed. This will be important to determine how much you can borrow and afford to repay.
Employment
You will need to be in employment to qualify for a payday loan, since this gives the lender peace of mind that you have a regular income coming through and can pay off your loan on time. This can be made through full-time work, part-time work, being self-employed, freelance or contracting. Some lenders will take a view if you are unemployed and between jobs or if you are retired and earning income through a pension or through charging rent.
Credit score
Payday loans are usually available for people with bad credit and the rates charged are designed to accommodate the risks that come with it. Your application will almost always undergo a credit check to see your current history and how well you have paid other types of loans in the past and what credit you have open. You can get a payday loan with credit scores under 600 and 550, depending on the lender.
Age
Payday lenders require you to be at least 18 or 21 years old to apply, depending on the state that you are in. Some states and lenders may have a maximum age such as 70 or 75 and this will depend on your income and employment status.
Social security
You will need to have a social security number (SSN) to be eligible and this is something that is requested in the loan application.
Residential status
Payday loan companies will accept all types of residential statuses including renting, living with family and friends and being a homeowner. If you own a property and are a homeowner, this is always seen as preferred and more valuable since the lender knows you have built up a certain credit score to be able to get a mortgage and have one regular location that makes it easier to contact you in the future.
Checking account
You will need to have a live checking account in the US or Canada so that your loan can be deposited into your account (usually on the same day of applying) and so that repayments can be automatically collected from your account.
Cell phone and email address
You will need to have a working cell phone in the US and email address since a unique SMS code and email link is sent to you upon approval and is you use this to electronically sign your loan agreement.
The Benefits and Disadvantages of Payday Loans
Pros
- Quick and Fast – Designed to help people with emergencies, payday loans are often paid out within 1 hour or the same day.
- Short-Term – This type of emergency loan can be used right away to pay for something and then paid back automatically on your next pay date.
- Regulated and Legitimate – The industry is well run and regulated and there are a number of protections in place to safeguard consumers.
- No Obligation – You can receive an instant decision and loan offer once you have completed the application and there is no obligation to proceed.
- Accepts Bad Credit – Even if you have a credit score under 600, 550 or 500, you can still get approved and get the funds you need if you have a stable income.
Cons
- Expensive – Payday loans are one of the more expensive loan options out there, with APRs ranging from 200% to 400%.
- Implications of Missed Payments – If you fall behind on repayments, it will negatively impact your credit score and the fees will start to add up.
- Cheaper Alternatives Exist – There are far cheaper alternatives that exist such as borrowing from credit unions, family, friends or selling items you no longer need.
10 Things To Consider Before You Apply For A Payday Loan
1. Can I afford it? Payday loans are expensive and if you cannot make repayments on time, the costs can add up.
2. How much do I need? The more you borrow, the more interest you will pay so try to calculate the exact amount you need to borrow.
3. Have I considered alternatives? Borrowing from family and friends, using credit unions and 0% credit cards will always be cheaper options than payday loans.
4. Is the lender legit? Check their terms and conditions, the rates charged and look for reviews online to see if a lender is legitimate.
5. Read through the loan agreement – Do you fully understand the terms of your loan including the amount you are repaying and when your repayment dates are. Do you understand the risks and consequences if you miss payment?
6. What happens if you cannot repay? Missing payment will accrue default fees, late fees, added interest and also negatively impact your credit score.
7. Can you cancel at any time? Yes, if your loan has not been funded, you can cancel the application. If you wish to cancel the application once you have the money, you can do so, but will be charged interest for the days it has been open for.
8. Am I paying off another payday loan? Using one loan to pay off another is not recommended and can cause a spiral of debt.
9. How fast do you need the funds? Payday loans can be administered in 1 to 24 hours and this is one of the reasons that they are expensive. If you are happy to wait, you will be lower interest through credit unions and other alternatives.
10. Is this a short-term or long-term solution? Payday loans should only be used for short term emergencies and one off expenses and should be used as a long term way to manage your debt.
How To Take Out a Payday Loan
In Store: With more than 23,000 stores located across the US, you can show up during office hours, line up, complete a form and wait for a decision and for payment. It is very common to receive your loan within an hour if you are approved. This has long been the most traditional way to access payday loans.
Online: Using an online lender or broker, such as Dime Alley, you can simply complete your details in less than 5 minutes and your details will be analyzed by more than 50 lenders and you will be presented an offer by the lender who meets your requirements based on loan amount, income and credit score.
Subject to further checks, you will given an online loan agreement which you can electronically sign and once completed, the monies can be transferred to your bank account ASAP.
How Do Payday Loan Repayments Work?
With a payday loan, you will typically repay the entire loan and interest on your next payday from work, which is usually the last Friday. This type of product typically only lasts around 2 to 4 weeks and lasts until your next ‘payday.’
We can also assist with longer term products, known as installment loans, so you can repay over 2 to 60 equal monthly installments – and this is better suited for when you borrow $1,000, $2,000 or $5,000.
Repayments are collected via a process known as ACH authorization which means that our companies can collect automatically from your checking account on the scheduled date each month, without you having to go to the bank or make a manual payment. It is designed to be as smooth and efficient as possible, with reminders sent to you on the days leading up to each repayment.
What Fees Should I Be Aware Of?
- Daily Interest – Payday loans typically charge $10 to $30 for every $100 borrowed and this is charged as a daily interest, so if your loan is open for 15 or 30 days, you get charged for this number of days of interest.
- Default/Late Fees – Late fees for a missed repayment range from $15 to $50 and only one fee can be applied each month, but the daily interest will continue to be charged.
- Renewal/Rollover Fees – You may be charged around $30 to $50 to renew and extend your loan for longer.
- Additional Interest – If you cannot repay your loan, it will be charging interest every day until it is paid off. If you go 10 days overdrawn, you will be charged an extra 10 days of interest unless you have an arrangement with the lender.
- Cooling Period – Once funded, you have 24-48 hours to cancel your loan and send the money back with no interest charged. If you wish to end the loan early, you can do so, but will be charged interest for the days it has been open.
What People Say About Us
“Dime Alley helped me when I had an emergency. It was fast, simple and effective and I would recommend them to anyone who needs a loan.”
Jane, Nevada, November 2022
“Had a good experience and got my loan the next day. I needed it to pay my bills and will consider using it again if I need a loan.”
Darryl, Michigan, February 2023
“Had a good experience and got my loan the next day. I needed it to pay my bills and will consider using it again if I need a loan.”
Darryl, Michigan, February 2023
What Are The Best Payday Loan Alternatives?
Credit Cards
Credit cards, even with bad credit, carry rates of 18% to 36% and if you need to borrow $300 or $500 for a particular purchase or an emergency that takes credit card, this could be a fast and cheap option, also usually available within a few days when it is sent to your home.
Credit Unions
With rates from 7.99% to 18% APR, this can be a very cost-effective short term loan. The only downside is that can take a little longer to be approved and funded than a payday loan.
How To Avoid Payday Loan Scams and Risks
Beware unsolicited emails and SMS messages
If you receive any emails or messages from individuals or companies that you have not applied with or heard of, these could be potential scams. You should always have to complete an application and this should be subject to various checks. If the SMS or email can offer guaranteed loans or requires you to transfer money to get your loan, this may likely be a scam and you should avoid it.
Beware certain words
By law, payday lenders should always undergo a series of checks to ensure a customer’s suitability for a loan. This includes asking for your income, employment and credit score and therefore more than 80% of applications are usually rejected. So beware websites and lenders that promise things like guaranteed approval, 100% accepted, no credit checks and loans for very bad credit or the unemployed- because these may not be legitimate.
FAQs and Common Questions
With Dime Alley, you could find payday loans ranging from $100 to $2,500 with the amount you can borrow based on factors like your monthly income, credit score and affordability.
Other things come into play too, including your residence (homeowners are often preferred), age, and whether you have any other similar loans open too.
No. We will never charge fees for using our service. Instead, we take a fee or commission from the lender if your application is approved and successful. The lenders will charge a daily or monthly interest if your loan is active and this will be presented to you in writing before you proceed.
Yes! Dime Alley is a broker and not a direct lender meaning that if you’re approved, we don’t provide the funds for your loan directly. Instead, we connect you to a lender best suited to your situation from our trusted panel.
Do not worry though, your information is completely secure and will not be sent or shared with any other companies or third parties and we certainly will not charge you anything for using our service.
Yes, to be eligible for a bad credit payday loan, you just need to make sure that you have a stable income, employment and can afford your monthly repayments without falling into financial difficulty.
As long as your financial position is improving and not getting worse, you can certainly be eligible, whether it is for an emergency or an everyday expense.
To accommodate those with bad credit, the rates charged may be just a little higher and the lender may adjust the amount you are looking to borrow. In some cases, Dime Alley may offer alternative products such as collateral loans (such as title or secured) or products from credit unions to help you get the money you need.
We can help if you want to apply for no credit check payday loans, but it is important to remember that most lenders will run a credit check to confirm your eligibility and to see how well you have paid other types of loans in the past.
If you have missed a number of repayments for similar loan products, this will be flagged by the lender and they will approach you with caution.
However, in some cases, we may suggest loans without credit checks, such as using your car, home or other collateral, or working with a credit union. If you worry that you might be declined due to having bad credit, do not worry, since our partners are very used to this and are willing to take a view on kinds of histories and backgrounds.
If you are live in a state where payday loans are illegal such as New York, Illinois or Maryland, you will connected to a national lender who can assist you or offer you an alternative product such as a credit union, credit card or personal loan.
Payday loans offer fixed interest, so the interest rate you are presented at the beginning of your loan application stays the same throughout the loan term and does not change due to the lender or market conditions, known as variable.
Payday loans are not revolving credit, since once the loan is paid, it is fully closed and completed. It is not like a credit card which automatically renews month-after-month. Payday loan products are short-term to be used for just a few weeks.
Yes, all loan quotes are no obligation, so before you have been fully funded, you can cancel your application at any time.
Once the loan is open and you have received funds, you can still cancel at any time but note that you could be charged a daily interest rate for the number of days that the loan has been open for and an early exit fee may apply.
This will depend on a state-by-state basis, with some US states limiting you to just 1 or 2 payday loans open at any time. This may be with the same lender or with two different lenders.
If your loan application is declined, nothing will happen. You will not be charged any fees and your credit score will not be damaged, however, there will be a soft search on the file as record of your application and this will disappear in a few weeks. It is not recommended to apply again with similar or different records since this will not likely be approved.
Yes, you will always have the option to repay your loan early by contacting the lender directly or clearing your account through the login section on their website. Paying off your loan early will often save you money on the overall cost of your loan since less interest is accrued.
Editorial Note
At Dime Alley, we understand that payday loans can play an important role to help hard working people between pay-checks. However, it is always important to remember that they carry rates that are above average and typically this is because you are paying for the convenience of being able to receive funds on the same day and for the short-term nature of the loan.
It is always important to check the loan agreement before you proceed and always think about how you are going to repay your loan since falling behind on payment can impact your credit score and late fees will apply.
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