For someone without great credit, unexpected financial difficulty is a big deal. Whether it comes from an illness, car trouble, or something else unforeseen, it can be hard to get past. That’s why many states allow payday loans. Payday loans are unsecured, short term loans that can help you cover bills, car repairs, medical expenses or any other unforeseen costs. In this article, we’ll look at the process of applying with payday loan lenders for cash loans that can see you through until the next payday.
Where to Go
Payday loan lenders have storefronts in a number of locations. Many have freestanding locations while others are located in plazas or strip malls. In recent years, online payday loans have also been made available.
How Does it Work?
To secure a payday loan, you’ll need to provide payday loan lenders with some verification of income or employment. Payday loan lenders use this information to determine how much you’ll be able to borrow. Most often, they’re only for a few hundred dollars. Some states have maximum amounts allowed. For example, in Illinois, you can only take out $1000 or 25% of your monthly gross income, whichever is less.
After the amount is determined, you write the payday loan lenders a postdated check in the full amount of the loan, plus some additional fees. If you don’t return on a predetermined date to repay the loan, the payday loan lenders can redeem the check unless you opt to roll over your loan, extending it, but also accumulating additional fees.
For online payday loans, the process is similar. The application is completed online or via fax, and the amount is transferred by direct deposit into the borrower’s account. The repayment and any additional fees are then withdrawn electronically on the borrower’s next payday.
Payday Loan Regulations
To prevent usury, many jurisdictions limit the annual APR that lenders can charge. Payday loan lenders are only allowed to operate in 37 states. The Consumer Financial Protection Bureau regulates all payday lenders, regardless of size. The Military Lending Act also imposes a 36% rate cap on certain payday loans made to active duty armed forces members and their covered dependents. It is also illegal for payday loan lenders to use the criminal process against any payday loan borrower.
Payday loans are a great option for those facing unexpected financial obstacles and who have little other recourse because of credit issues. As long as they’re repaid on time, they provide an excellent service to those in financial distress.