Payday loans and Cash advance loans provide fast cash for emergency situations.
What is a payday loans
Also known as cash advance loans are small loans based on the borrowers next paycheck. The loans can range anywhere from $100 to $1000.
Payday loans are highly regulated, and each state has its unique guidelines and requirements for maximum fees, rates, and loan amounts. Because of the cost usually associated with payday loans, some states have completely banned payday loans and made it illegal for any lender to advertise and or offer these loans.
Qualifying for payday loans and cash advances
Because payday loans are offered based on the next paycheck, the qualification guidelines are much simpler than traditional loans.
Cash advance loans and payday loans are viewed as low-risk loans by most people. However, there are risks associated with these loans that will affect your qualification.
A lender has to analyze credit history, occupation, outstanding payday loans, bad checks, and wage garnishments to determine qualification.
Payday loan lenders and cash advance providers are not credit score sensitive. All lenders require the borrower to be 18 years old with an active bank account, a pay stub, proof of employment, and a state or government-issued ID.
Things to Consider
Payday loans are a costly method of acquiring financing. Thus, before committing to a payday loan, make sure the expense for which you are securing funding for is urgent.
A payday loan or a merchant cash advance should be one of the last options to consider. Credit cards often have special promotional rates, which is a much more attractive alternative.
A personal loan can also be considered as an option. Be sure to review the interest rate and terms of the payday loan you are offered with the lender to make sure it’s the right choice for you.
How much does a payday loan cost
Payday loans and cash advance loans are considered high-cost loans. It’s not necessarily because of the interest rates they charge.
Instead, it could have a lot to do with the fees associated with these loans. For example, if you get a $200 payday loan, and they charge you a $50 processing fee, you are paying 25% just for processing. And that’s over a very short time; till your next payday.