Payday Loans - Frequently Asked Questions
Payday loans are short-term loans that are often used to pay for unexpected expenses. They can be very helpful in getting you through to next payday. Because payday loans can be granted without a credit check, they offer a quick solution to a time of stress, and they can help you avoid those astronomical overdrawn account fees. Keep in mind, though, that payday loans are meant to remedy financial challenges on a short-term basis; they are not a good financial solution for a long-term period.
Below are frequently asked questions regarding payday loans. If you're considering a payday loan, first gain an understanding of the laws in your state and payday lending practices in general. The following answers should set you in the right direction.
Are There Limits to Number of Loans I Can Get?
Payday loans are regulated by both federal and state laws. As such, the number of loans you can have, loan limits, and repayment terms will depend on your state. You can find governing regulations for each state here.
Will My Credit Score Be Checked?
The approval process varies by lender. Many do not approve or deny loans based on your FICO score. Instead, credit eligibility is evaluated through the use of a customized scoring model. Also, your checking account history and employment history will be considered.
Is the Process of Application Difficult?
The process of application is simple and only takes about 10 to 15 minutes. Typically all that is needed is identification, a pay stub, and a checking account. If approved, cash is either given to you immediately or wired to an account of your choosing. And there is no need to revisit a branch to make loan payments as the lender will likely debit your checking account automatically once your payroll is deposited.
How Much Can I Borrow?
Maximum payday loan amounts vary by state. Some states have a loan cap of $500, while others have no limit. Of course, it is recommended that you not borrow more than your monthly income. To check the regulations in your state, visit here.
When and How Will my Loan Be Approved?
Because payday loans are not subject to review by underwriters, the approval process is fast. Filing an application generally takes a few minutes, as does the approval process. Terms and fees are reviewed, and generally the you receive your borrowed money immediately.
How can I repay my Own Loan?
Payday lenders typically offer multiple repayment options. In most cases, you'll be required to write a postdated check (not more than 30 days out) for the amount borrowed plus interest and fees. In other cases you may sign a document allowing the lender to electronically withdraw funds from your checking or savings account on a specified date. If you believe you will be unable to cover a coming loan payment, you can make interest-only payments and defer your balance, though this option may depend on your states laws.
Will I Be allowed to Pay It Off Early?
Yes. The earlier you repay a payday loan, the better. Unless the lender's terms specify, you should not be penalized for early repayment. Additionally, if you paid an origination fee, some lenders will return a portion of that upon early payoff.
For more information about payday and short-term loans be sure to read up on the pros and cons of short-term loans.