When it comes to money and unexpected expenses, taking money out of your own emergency fund is always preferable to borrowing money. However, the unexpected nature of life may require you to occasionally search elsewhere for quick cash. Even though the majority of us dislike the idea of borrowing money, some loan products are designed specifically to help you in a pinch.
However, not all loan products are the same; some imply broader financial drawbacks, which you’ll have to consider if you’re looking to secure a fast loan. In this article, we’ll discuss payday loans, what they are, how they work, and some of the benefits and drawbacks associated with securing a payday loan.
What Are Instant Payday Loans?
Instant payday loans, also known as cash advances, are short-term loans that borrowers are expected to repay by their next payday, which is usually around two to four weeks after they’ve secured the loan. This includes the principal loan amount, along with the associated costs of the loan.
Payday loans are unsecured loans that don’t usually imply a credit check simply because the lenders don’t usually lend more than a few hundred dollars. They can be fantastic financial aid in pressing and emergencies in which you need cash but don’t have the time to go through lengthy loan application processes and loan approvals.
Traditional payday loans are typically approved within a day and deposited into your bank account the next business day. The benefit of instant payday loans, however, lies in the fact that the loans are approved in a matter of minutes, which allows you to take care of whatever emergency you have on your hands.
Benefits of Instant Payday Loans
Instant payday loans have their benefits; since there’s no collateral, lenders can’t sell your property to recover part of their money. However, that’s only one of many benefits associated with instant payday loans that make them a viable, short-term financial solution.
One of the main advantages of payday loans is that they require no credit check. Traditional loans typically involve a credit check to prove the borrower’s creditworthiness, and they’re only approved for borrowers with good credit scores.
Since instant payday loans don’t require a credit check, even borrowers with bad credit can gain access to quick cash. Payday loans generally have minimal requirements when compared to traditional loans. Basic requirements often include being of legal age, submitting proof of income, and having an active bank account.
The instantaneous nature of payday loans is characterized by a fast approval process, which is usually done within minutes following your online application. If everything goes according to plan, the lender will deposit the money in your checking account, granting you quick access to the previously agreed-upon loan amount.
Lastly, payday loans are financial products of a regulated industry, with laws in place to protect consumers from predatory practices. In fact, some lenders reward “good behavior” in terms of filing a report with the Credit Bureau, notifying them that you repaid the debt in full, which could benefit your credit score. This can help you build up your credit, and secure loans with more favorable terms in the future.
However, it’s also worth noting that payday loans come with significant drawbacks, which we’ll discuss below.
Drawbacks of Payday Loans
When extending unsecured personal loans to those in need of instant funding who might not otherwise qualify for a traditional loan, the lenders take on additional risk. To mitigate the risks, the lenders typically impose higher interest rates and annual percentage rates, which may range up to 300% per year, depending on multiple factors.
The unfavorable repayment terms paired with a rather short repayment period can make timely repayment very difficult, especially for the financially challenged. Considering that the interest may often cost more than the original loan amount, it’s easy to get caught in a loop of using cash advances.
If you default on your loan, you’re almost certainly accruing additional debt in terms of interest penalties, which can have devastating effects on your finances and your credit score. In fact, the lender can sell your debt to collectors, and you may end up in court. A timely repayment is the best repayment, and as long as you repay your loan by your next paycheck, you shouldn’t have any issues.
Requirements for an Instant Payday Loan
Instant payday loans are characterized as unsecured loans, and as such, they typically don’t require any collateral and don’t have any stringent requirements, like a good credit score. However, they do have some minimal requirements the borrowers must meet in order to secure the loan.
- Personal identification: A government-issued personal ID, such as a driver’s license or a passport, is typically required to verify the borrower’s identity and that they’re at least 18 years old to qualify for a payday loan. The age requirements vary by jurisdiction, and some states impose their own age limits.
- Active bank account: The lender requires proof of an active and valid checking account to deposit the loan funds and to automatically withdraw repayments on the due date. Some services don’t have this requirement.
- Source of income: Applying borrowers must submit proof of income to demonstrate their ability to repay the loan. This can be through employment, self-employment, social security, pensions, or other income streams, and the vast majority of lenders accept pay stubs or bank statements as proof.
- Contact information and address: Due to regulatory compliance, borrowers must also provide valid contact details, including an address. Any utility bill or lease with your name and address will suffice.
It’s also worth noting that while payday loans don’t have such strict requirements and require no collateral, most come with origination fees and prepayment penalties. Some payday loans can be extended, which also comes with fixed monthly installments.
Choosing the Best Instant Payday Loan
The rise of online technologies introduced online lenders, and many services, including those offered by traditional financial institutions and direct lenders, are now easily accessible online. However, there are plenty of online lenders currently available, and choosing the one that best fits your needs isn’t easy. Consider the following factors when comparing payday advance lenders:
- APR ranges: Due to the short-term nature of payday loan products and the high risk of default perceived by payday lenders, annual percentage loans for payday loans may go up to 300% or even higher. However, in states in which payday loans are heavily regulated, the APR can be lower to prevent predatory practices.
- Loan amount: Payday loans are small-dollar short-term loans, so the loan amounts typically range from a few hundred dollars to $1,000. Some lenders offer more in the form of payday installment loans, but it’s important to only borrow as much as you can comfortably repay or enough to cover your immediate financial needs.
- Loan terms: Payday loans imply repayment within the next pay period, which means they’re usually repaid within two to four weeks from the moment they’re obtained. However, it’s worth considering that some lenders provide more flexible and longer terms than others. Choose a lender with terms that suit your budget and financial needs, and remember that shorter payback terms usually imply higher monthly installments and vice versa.
- Application requirements: Most payday loan lenders offer simple application procedures that don’t require an in-person visit to a branch office. Additionally, requirements for loan approval are, with most payday lenders, quite minimal. Some lenders do have stricter application requirements than others, so it pays to inquire when searching for a reputable lender.
- Funding speed: Many instant payday loans only take a few minutes to process, approve, and deposit funds into your checking account. However, not all instant payday loan lenders are the same, and some might take longer than just a couple of minutes. Office hours, weekends, and holidays and any other day during which ACH isn’t working also apply when it comes to approval time.
- Reputation: Before choosing a lender, check internet reviews and speak with friends and family who have previously dealt with that financial institution. Reviews can provide important information about the length of the approval process, the quality of the lender’s customer service staff, and whether typical consumers are genuinely eligible for competitive rates.
Summary
If you’re looking for money to cover unexpected expenses, such as a vehicle repair, buying medicine, or just filling the gap until your next paycheck, payday loans are a viable short-term financial option. If you’re looking for a reliable payday loan lender, don’t hesitate to contact us. Our service aims to connect you with reputable third-party lenders and marketers without inquiring about your financial needs. Our service is available 24/7, and you can inquire about payday loans regardless of whether it’s day or night, weekday or weekend.
The online inquiry takes no more than a few minutes to fill in, and there are no hidden fees with our service; the last thing you want to do is pay extra money when you’re already short on cash.