Payday loans are very popular, and around 12 million people use them each year. However, not everyone has heard of payday loans so they are commonly misunderstood. If you find yourself asking “what is a payday loan,” then you’ve come to the right place.
Payday loans are great quick fixes to short-term money issues. The name comes from the idea that these loans are paid back shortly after you receive them, for example on your next payday. People may use payday loans for unexpected financial concerns, such as repairing a broken-down car or home repairs.
To find out everything you need to know about payday loans, keep reading.
What is a Payday Loan?
A payday loan is a short-term loan where you can borrow a certain amount of money based on your income. They are a kind of high-cost loan, which means that the APR is usually 100% or higher. With a payday loan, you will be able to borrow a small amount of money and will need to pay it off quickly.
You can find out more information about services that offer payday loans here. One way or another, they are a great way to get some fast cash when you need it most.
Who Might Use a Payday Loan?
Anyone can apply for a payday loan; however, certain criteria will impact the amount of money you can borrow. Lenders will look at your income to ensure you will be able to repay the loan in full and meet the interest rate.
People with sudden or unexpected bills who don’t have the money to pay them may use a payday loan. People may also use them for rent or to pay back credit card debt.
It’s also possible to take out more than one payday loan every year. This can come in handy when you need fast money.
What is the Interest Rate?
The interest rate of your payday loan will depend on the lender you use. However, it will usually be over 100% of the loan amount you borrow. Payday loan interest rates are high to ensure you pay the loan back on time.
Check out various payday loan lenders and their interest rates here. The interest rate is subject to change, so make sure you stay up to date with your lender before signing your loan agreement.
When Will I Need to Pay the Loan Back?
This will be at the discretion of your lender. However, as you may have guessed, you will normally need to repay your loan on your next payday. This usually gives you around a month between when you borrow your money and when you need to pay it off.
It is best to pay your loan back as quickly as you can, as this means you avoid higher interest rates. In most cases, payday loan lenders don’t charge a fee for paying a loan back early. However, it is a good idea to double-check this with your lender.
What Can a Payday Loan be Used For?
Once your application has been approved, you can use your payday loan for whatever purpose you want! Most people only apply for a payday loan if they have unexpected bills to pay that they cannot immediately afford.
However, others may use them during busier shopping periods through the year, for example around Christmas or birthdays. What you use it for is up to you, just make sure you can meet the repayments on time.
Are Payday Loans Safe?
As long as your income is every to cover the cost of repayments and meet the interest rates, payday loans are safe. Always make sure you choose a reliable lender with good experience in dealing with payday loans. Doing so will avoiding errors and the process is plain and simple.
It is also not very likely that a payday loan will affect your credit score, which is good news for any borrower. Of course, this could change if you are unable to make repayments.
How Do I Apply?
Find out how to apply for a payday loan here. There are many lenders available online. The application process is generally very straightforward and you’ll only have to provide some basic details about yourself to apply.
Lenders may ask for proof of income when applying for a payday loan. This can be in the form of a pay slip or bank statement. You will also likely be asked to provide proof of identity documentation.
A passport or driver’s license is accepted as a standard form of identification. Other lenders may have more specific requirements, so always make sure to provide them with the information they ask for. Otherwise, the process could be delayed and it may take longer to get your loan.
Can I Get a Payday Loan With Bad Credit?
Yes, you will still be able to apply for and get a payday loan even with bad credit. While a good credit score may allow you to apply for more payday loan options, you will still find many available for those with bad credit.
Your payday loan lender is likely to check your credit score upon application. However, this is standard practice and you shouldn’t let it worry you. Your options for payday loans may be slightly more limited with poor credit, however, you will not be completely excluded from them.
Get a Payday Loan When You Need a Little Extra Help
So, what is a payday loan? It’s a short-term loan that allows you to get a little extra money when you need it most. You can pay your loan off at an agreed date between you and your lender, usually on your next payday.
Payday loans are safe and secure. Just make sure you know you will be able to meet the repayments and that you are clear about the interest rate. If you have any questions, you can always contact your payday loan lender.
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