Are you in a bind and need to get your hands on a little extra cash before the end of the workweek? Then a payday loan could be an answer to your problem. We get it, times can be tough and emergencies always come up when you’re least prepared for them. Here’s what you should know about payday loans and how they can help you when banks won’t.
When you take out a payday loan, it means that you are receiving a sum of money in advance of your next pay date that will be paid back with interest when you get paid. It is an unsecured loan so no collateral is required to obtain the funds. The money is either paid back at the store location where it was received or it can also be deducted directly from your bank account by the lender.
If your credit isn’t in the best shape, odds are you aren’t going to be able to walk into a bank or credit union and receive more than a new coffee mug for being a customer. These loans are popular for customers with lower credit ratings since traditional lenders will not provide financing.
Lenders offering payday loans don’t run traditional credit checks so your credit score won’t be an issue for them. Short term lenders are more focused on your current employment and banking history in order to underwrite the loan.
Another very important reason for the popularity with payday loans is the speed with which lenders are able to provide financing. The turnaround time for submitting an application and receiving funds can be done in the same day in many instances. So, when timing is important, these loans do deliver the speed needed to help.
In order to receive an unsecured loan without a credit check, the APR, or annualized percentage rate, will be higher than traditional loans. Many payday loans will have an interest rate of around 15% for the term of the loan. So, if you borrow $100, the interest fee due on your next payday would be $15. That being said, it’s important to weigh the costs of receiving a payday loan to the potential consequences of being short on funds you require.
It is important to know how and where your lender is licensed to do business. A state-licensed lender has been vetted by your state regulators to ensure you receive a safe and legal loan. State regulators also put protections in place like cooling-off periods and loan limits to ensure their consumers are protected.
A lender licensed through tribal affiliations or an off-shore company does not have to follow state law for how much they charge and many also work outside of the consumer protections that many states put into place. This makes it very important to know who you’re using when choosing a lender.
If a bank or credit union does offer a payday advance, most fall very short when trying to offer it for customers without a prime credit rating. Many customers are simply not eligible or the timeframe required to receive financing is too lengthy. Large financial institutions can’t compete with the speed of a smaller lender in many instances. However, if you have the time and are eligible to receive a small bank loan, it would likely be more cost-effective in the long term.
If an emergency comes up and you know that you won’t have enough money to cover it until after the next time you get paid, a payday loan can be a lifesaver. Applying for a bank loan would take too long to be of any help. Bank loans also have stricter criteria in place that you’d have to meet to qualify for the loan.
If you need money fast and you can’t afford to wait for it until after your next check, payday loans are a very viable and effective option. It is important to do your research on who you choose to do business with for a short-term loan. Again, the need for obtaining the funds should be weighed against the risks of not having the funds for your situation or emergency.
If you are looking for a short-term loan, Lending Bear can help! Simply visit your nearest Lending Bear branch or apply online today to speak with one of our friendly and professional team members.