Nearly 49% of Americans live paycheck to paycheck. So what happens when an emergency expense comes up? Most turn to payday loans.
Payday loans are small, short-term loans that are meant to be paid back with your next paycheck. Read our tips below to know when to get a payday loan and if it’s right for you.
5 Signs to getting Payday Load
1. The Requirements
Before researching payday loans, you need to know the basic requirements to qualify. Under the U.S. government’s Consumer Financial Protection Bureau (CFPB), borrowers must:
- Be at least 18 years old
- Have an active checking account
- Proof of income
- Valid identification
Denial of a payday loan could be one of several reasons:
- You make less than $500 monthly net income
- You don’t meet state repayment requirements
- You have an outstanding loan
- You’re active-duty military
- Recent bankruptcy
- Recently bounced checks
- Not employed long enough
- Recently opened your bank account
2. You Need Cash Now
People usually need payday loans to avoid getting further behind on bills or if an unexpected expense comes up such as a car repair or medical expense. Payday loans can be in your bank account within a few hours of being qualified. Traditional loans take longer to process, get an approval, and make its way to your bank account.
If you need to cover immediate expenses with a short-term loan, captaincash.ca is an option for Canadian citizens.
3. Take a Small Amount
Only borrow what you need. Most states have statutes for payday loans and the typical amount for a loan is between $300 and $1000.
Don’t make the mistake of thinking you’ll be approved for the highest amount allowed. Lenders look at your monthly income, expenses, and payday lending history to determine the amount you’ll be able to pay back.
4. Pay It Back Fast
Each year, as many as 12 million Americans need a payday loan. Borrowers make on average $30,000 a year due to the high-interest rate and associated fees.
For every $100 borrowed, there’s a fee between $10 and $30. A low-end fee of $15 per $100 means the annual interest rate is 400%. Paying back the loan in full as quickly as possible means your interest rate charges are lower.
If you’re confident you can pay the short-term loan by the time your next paycheck hits your bank account, payday loans are a viable option.
5. Beware the Risks
It’s easy to get into financial trouble with short-term loans so it’s better to be aware of the risks. The biggest risk is chronic borrowing.
Instead of cutting back on expenses and making lifestyle changes, there are those who repeatedly borrow to fund the life that they want. Borrowers rollover loans with additional fees which quickly add up to be more than the amount borrowed. This forces some people to take out another loan to pay what they already owe.
Know When to Get a Payday Loan
Payday loans have a bad reputation but in the event of an emergency, it’s a nice option when you need cash fast. Be informed of the benefits, risks, and when to get a payday loan first before applying.
If you’re interested in more articles about business and finance, check out my blog, TechDee