People sometimes turn to payday loans when they find themselves in need of cash for an emergency, especially if they are still a few days away from their next paycheck. Generally, these types of loans are appealing to people who are struggling to pay bills and living expenses at the end of the month. However, they can also be useful when unforeseen expenses like traffic tickets or minor health issues come up.
A cash advance from one of these loans can be a good way to quickly pay bills to avoid incurring late fees. As long as you are able to prove your employment, you will be able to secure a small, short-term payday loan, typically for $500 or less. It is important to note that these types of loans often have high interest rates, so you should only take them if you have no other option. Additionally, if you take a cash loan, should attempt to pay it off in a timely manner without incurring any additional charges.
How do payday loans work?
Payday loans usually involve a simple application process, as long as you are not in one of the 18 states where these types of loans have been outlawed. In order to apply, you must meet the following basic eligibility criteria:
- You must be a U.S. citizen or permanent resident.
- You must be at least 18 years of age (minimum age may vary by state).
- You must be able to prove you have a steady source of income.
In order to apply for these payday cash loans, you will need to visit the nearest lender with an ID, a recent pay stub and a post-dated check. The lender will cash the post-dated check if you fail to repay your loan by the due date. This can cause you to incur an overdraft fee from your bank, which will end up costing you even more money.
You do not need to undergo a credit check in order to receive a payday advance, which means your credit score will not influence the interest rate you receive. Borrowers with no credit or poor credit may find this type of loan appealing, but it is important to keep the high interest rates in mind. Typically, the interest rates for these loans are higher than the most expensive rates for credit cards.
Since the interest rates on payday loans are so high, borrowers are encouraged to only use them for short-term emergencies. With interest rates as high as 400 percent, you could end up paying over four times the cost of the initial loan if it took you a year to pay it back in full. On average, loan from a payday lender typically involve fees of about $15 for every $100 that you borrow.
Payday Loans for Military Service Members
Military service members who are in need of money as soon as possible for emergency car repairs, travel or other unexpected expenses often turn to a quick payday loan for cash. Since so many soldiers, sailors, marines and airmen have relied on these loans, Congress instituted the Military Lending Act (MLA) in 2007. The MLA made it so that most loans for service members, their spouses and dependents could not exceed 36 percent interest.
When should you get a payday loan?
Generally, you should not be looking to get a payday loan unless you are having a short-term financial emergency. Overstepping and borrowing more than you can pay back from one of these loans is an easy way to fall into a cycle of debt.
In fact, cash advance loans are sometimes considered predatory due to their high interest rates. This is why they have been banned in a number of states. Nonetheless, one of these loans can be helpful if you are using it carefully and for the right reasons.
In order to be financially responsible, you should only use payday loans as a temporary measure. For example, this type of loan may be a good option if some unexpected cost has caused you to come up short on the money for your bills for one month. However, if you find yourself applying for one of these loans to pay for necessities like food or rent, then you should try to find some alternatives.
Alternatives to Payday Loans
If you find yourself relying too heavily on short-term cash loans to make ends meet, you may need to consider other options to help stabilize your financial situation. It is important to remember that these loans are not meant to be long-term solutions. Here are some alternatives you can take to reduce how often you are using relying on these loans.
Reduce Your Monthly Expenses
The first step you can take to avoid using payday loans is to analyze your budget and see where you can make cuts on your overall spending. For example, you can prepare more home-cooked meals instead of eating out in order to save on your food expenses. If you have the opportunity to carpool or use public transportation, you can reduce your gas costs. Reducing your expenses is a good way to increase your monthly savings.
Find a Side Job for Supplementary Income
If you have some free time and energy, you should consider a side job so that you can supplement your income. Nowadays, there are a wide variety of freelance jobs that you can do from the comfort of your own home. Some popular online jobs include content writing, translating, transcribing and more.
Take Out a Personal Loan
Most personal loans offer better interest rates than do payday loans. If you are in need of long-term financial support, you should consider taking out a personal loan as opposed to borrowing from a payday lender. While it may be difficult to get approved with no credit or poor credit, many online lenders are now offering loans to consumers with a full range of credit scores. A personal loan may be a better option for long-term borrowing.
Apply for a Line of Credit
Applying for a new credit card can be a good way to quickly gain access to cash, and the interest rates are more favorable than with payday advances. This is another popular alternative for consumers with an acceptable credit score.